All 5 Peter Dowd contributions to the Finance Act 2018

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Tue 28th Nov 2017
Budget Resolutions
Commons Chamber

1st reading: House of Commons
Mon 11th Dec 2017
Finance (No. 2) Bill
Commons Chamber

2nd reading: House of Commons
Mon 18th Dec 2017
Finance (No. 2) Bill
Commons Chamber

Committee: 1st sitting: House of Commons
Thu 11th Jan 2018
Finance (No. 2) Bill (Fourth sitting)
Public Bill Committees

Committee Debate: 4th sitting: House of Commons
Wed 21st Feb 2018
Finance (No. 2) Bill
Commons Chamber

3rd reading: House of Commons & Report stage: House of Commons

Budget Resolutions

Peter Dowd Excerpts
1st reading: House of Commons
Tuesday 28th November 2017

(6 years, 4 months ago)

Commons Chamber
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Peter Dowd Portrait Peter Dowd (Bootle) (Lab)
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As the Chancellor gave his Budget speech last week, there was a collective groan across the country not just at the bad jokes, but at the content of the most uneventful Budget speech of recent times. There was no game-changing investment announcement and no lasting solutions for the growing difficulties facing our country. The Chancellor’s speech personified this Government: out of touch, inconsistent and directionless.

The Cabinet is morbidly and irrevocably split on Brexit and, rather than focusing on their individual briefs, Ministers now spend their days attempting to steal each others’. The International Trade Secretary wants to run Britain’s foreign policy. The Environment Secretary is learning all about hypothecation, apparently fancying himself as Chancellor, and The Times reported that he is busy researching the difference between a J curve and a J-cloth. Meanwhile, the Foreign Secretary continues to scheme for the top job. He is the first to praise the Prime Minister, while constantly plotting to undermine her—Iago on steroids. Ironically, the only person who does not want to be in No. 10 is its current occupant. She remains, as in the Monty Python parrot sketch, nailed to the perch and “off the twig”. The Prime Minister’s metabolic processes are, politically speaking, history.

The most important announcements made last week were not the Chancellor’s recycled policies, but those from the Office for Budget Responsibility. The OBR lowered UK growth forecasts, business investment, productivity rates and wage growth for the next five years, blowing a hole in the Government’s economic credibility. As for balancing the books, under the Government’s current projection, the UK budget will not be in surplus until 2030 at the earliest—a full 15 years after the former Chancellor said that the deficit would be eradicated. Workers who have already endured a decade of stagnant wages and lost earnings will not see their pay return to pre-crisis levels until 2025. And there is more. UK households face the biggest squeeze in disposable income since records began. The message from the OBR is clear: Britain under the Tories is now facing a record 17-year downturn in pay.

The Budget did nothing to eradicate the impact of austerity on women, who have disproportionately borne the brunt of it. The abolition of stamp duty for first-time buyers is of course welcome, but the OBR rightly points out that the move will increase house prices. Many Government Back-Benchers called for action to help the next generation, but the best the Chancellor could muster was a millennial railcard that young people cannot even use to commute to work and that will not even cover the cost of the 3.6% rail fare increase next year.

On universal credit, the Government finally listened to Labour and scrapped the seven-day waiting time, but they have done nothing about the roll-out.

The Government once again ensured that the NHS and its staff will remain underfunded and underpaid, and the extra money announced in the Budget does not even meet NHS England’s call for extra funding. Far from being dead and buried, the public sector pay cap remains alive and well. Public sector pay is now set to fall to its lowest level by comparison with the private sector, and the Chancellor is trying to divide public sector workers.

As I have said so many times at this Dispatch Box, the UK’s economic growth wholly depends on our ability to raise productivity rates, and there was nothing of any substance whatsoever in the Budget to help that. The Government continue to fail in delivering the infrastructure and investment that the regions so desperately need. Like so many of this Government’s policies, their industrial strategy White Paper released yesterday is thin on details and thinner on ideas—another damp squib. It is about time that this Government went. They should pack their bags, get the Prime Minister out of No. 10 and hand things over to the Labour party to do the job properly and get growth back for this country.

Finance (No. 2) Bill Debate

Full Debate: Read Full Debate
Department: HM Treasury

Finance (No. 2) Bill

Peter Dowd Excerpts
2nd reading: House of Commons
Monday 11th December 2017

(6 years, 3 months ago)

Commons Chamber
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Peter Dowd Portrait Peter Dowd (Bootle) (Lab)
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It is a shame that the Chief Secretary to the Treasury is not in her place at the Dispatch Box. Notwithstanding the fact that the Financial Secretary is fantastic at doing his job, we should have the Chief Secretary here today. In my opinion, it is disrespectful to the House that she is not here. I think she is most probably looking for Shergar, frankly.

I wish to use my remarks to convey a message from the British public to this increasingly divided and out-of-touch Tory Government. It is a message that comes from all corners of the UK—from my home town of Bootle, from the city region of Liverpool, from Manchester, Leeds and Newcastle. It is a message from Edinburgh, from Cardiff, and from Kent; from Birmingham, from Oxford, and from Nottingham: from every region. It is a message from people who live in rural communities and urban centres alike. It is a message from public sector workers, private sector workers and those on zero-hours contracts; from the young and the old, as well as all those in between, all of whom have been let down by this Government. [Interruption.] They have been let down by them—private sector workers and public sector workers believe that, and that is why they are turning to Labour. [Interruption.] Conservative Members can laugh until the cows come home, but that is the reality.

It is a crystal clear message to the Tories: enough is enough. People across the country are fed up with this Government’s inaction and economic incompetence—and incompetence is the word. With this shambolic Government, every day—every single day—feels like groundhog day. Day after day, we are told that there are fresh cuts to Departments and that our overstretched public services face even more austerity, while we receive the same empty pledges—we have heard more of them today from the Minister—that at some point in the ever-distant future, the deficit will be eliminated.

Kelly Tolhurst Portrait Kelly Tolhurst (Rochester and Strood) (Con)
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The hon. Gentleman speaks about incompetence from the Government. Does he not recognise, when he is speaking about people travelling towards Labour, that perhaps the Opposition’s incompetence is in making promises that they cannot deliver on?

Peter Dowd Portrait Peter Dowd
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Let us have a general election and we will deliver on those promises.

On Brexit, there is no abating the deep divisions between warring Cabinet Ministers. Within a few hours of the ink drying on the joint statement between the Prime Minister and the European Commission and the agreement to move on to trade talks, we had the Environment Secretary contradicting the Prime Minister and briefing the press that unhappy leave voters can tear up any Brexit deal that is negotiated, while on the Sunday talk shows the Brexit Secretary undermined the Prime Minister further by downgrading the agreement reached to merely a “statement of intent”. Given that there is much talk of a divorce bill, perhaps I can take the matrimonial analogy a little further. Do people make proposals of marriage or simply statements of intent? Did the Brexit Secretary propose to his wife or make a statement of intent?

Charlie Elphicke Portrait Charlie Elphicke
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The hon. Gentleman’s talk of bills reminds me that the Labour party has made a massive number of pledges and wants to go on a borrowing binge, but 22 times it has failed to explain how it will fund those pledges. It has gone from “You don’t need a number” to “You can’t put a figure on it at the moment” to “It’s not difficult.” May I ask the question for the 23rd time and invite him to tell the House how Labour would pay for its plans?

Peter Dowd Portrait Peter Dowd
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With the greatest respect, I am not the hon. Gentleman’s research assistant. I refer him to Labour’s proposals in “Funding Britain’s Future”. I know that he can read, so I suggest that he should go and have a look at that document.

The Brexiteers in the Cabinet continue to undermine any attempts to progress the talks and compromise with our European partners. We had a bizarre scenario today—everyone telling the Prime Minister how wonderful she was. Last week she was a basket case, as far as I could tell, but this week she is a wonderful woman. The Brexiteers are happy to continue to create economic uncertainty to the detriment of businesses and workers alike.

Dan Carden Portrait Dan Carden (Liverpool, Walton) (Lab)
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Was my hon. Friend surprised, as I was, that the Financial Secretary did not mention wages once? He did not mention that real wages will not return to pre-crash levels for almost a decade. Do this Government care about people’s wages?

--- Later in debate ---
Peter Dowd Portrait Peter Dowd
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The answer to the last question is no, they do not. The Budget proved yet again that the Government are completely unable and unwilling to recognise the challenges that the country faces. The Chancellor and the Prime Minister are instead more concerned about sorting out the Democratic Unionist party and the fringes of the Tory party.

Leo Docherty Portrait Leo Docherty (Aldershot) (Con)
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The hon. Gentleman is presuming to tell us about the opinion of the electorate, but I appeal to him to bear in mind my constituents’ opinion during the rest of his remarks. They fear the unleashing of Marxist mayhem by the shadow Chancellor. Can the hon. Gentleman confirm that in 2013, the shadow Chancellor said that

“I’m straight, I’m honest with people: I’m a Marxist”?

Peter Dowd Portrait Peter Dowd
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The hon. Gentleman can ask as many questions as he likes—[Interruption.] And the hon. Member for Croydon South (Chris Philp) can say “Yes or no?” But the Conservative party is in a state of chaos, it is as simple as that. After seven years, the verdict on Tory austerity is clear for all to see. Economic growth stands at its lowest point since the Conservatives came to power, and it has been revised down by the Office for Budget Responsibility for every year of the forecast. The UK has the slowest growth in the G7, and the Institute for Fiscal Studies has warned of two decades of lost earnings growth. That relates to what my hon. Friend the Member for Liverpool, Walton (Dan Carden) said.

Steve McCabe Portrait Steve McCabe
- Hansard - - - Excerpts

I agree with my hon. Friend that the predictions suggest that the economy is not in good shape. Was it not extremely sad and disappointing that we did not hear from the Financial Secretary a word of acknowledgement of the pressures that are being inflicted on public services, such as children’s services? They have been damaged not only by cuts but by Government errors. The Minister did not say a word to suggest that the Government would make reasonable adjustments, even in cases in which they have acknowledged that errors have been made. Birmingham, for example, has lost £100 million as a result of mistakes that the Government now acknowledge, and that is money that could be spent on children’s services and social care.

Peter Dowd Portrait Peter Dowd
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My hon. Friend is prescient, and I will come to the point that he makes in a minute. Let us continue with a few more statistics, because it is worth our while to look at them. The Minister referred to productivity rates, and UK productivity rates have fallen far behind those of the French, the Americans and the Germans. The OBR’s decision to revise down UK productivity rates for every year of the forecast is seismic, and it reflects years of inaction from a Government who have refused to invest in our infrastructure and skills or in the UK workforce.

Rachel Maclean Portrait Rachel Maclean (Redditch) (Con)
- Hansard - - - Excerpts

The hon. Gentleman is coming out with some excellent statistics, but I hope that he will not forget to mention the jobs miracle that has occurred under this Government. Unemployment is at a 43-year low, which means more people earning money rather than being unemployed under a Labour Government.

Peter Dowd Portrait Peter Dowd
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The Chancellor did not know what the unemployment figure was the other day. Let us put it like this: no matter how many people are in work, the bottom line is that it is not right that they should have low and stagnant wages, poor terms and conditions, zero-hours contracts or insecure work. The Government should be dealing not just with the employment rate, but with terms, conditions and wages.

Grahame Morris Portrait Grahame Morris
- Hansard - - - Excerpts

Does my hon. Friend agree that the WASPI women, who had expected to retire at age 60 and who are being compelled to work for another six years, are also furious and feel terribly let down by the Government?

Peter Dowd Portrait Peter Dowd
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My hon. Friend makes an excellent point. The Government have reached the stage where they blame anyone they can. The gaffe-prone Chancellor has blamed disabled people for bringing down the productivity rate. He is so out of touch that such comments are water off a duck’s back to him.

As the Minister said, this is the third Finance Bill of the year. All three of them have failed to address the challenge that our economy faces.

Helen Whately Portrait Helen Whately (Faversham and Mid Kent) (Con)
- Hansard - - - Excerpts

The hon. Gentleman referred to low wages, but he knows that the Finance Bill contains measures to raise the national minimum wage, so we are addressing that. He seems to be reluctant to answer people’s questions, so I want to bring him back to some that he was asked a few moments ago. My hon. Friend the Member for Aldershot (Leo Docherty) asked him a simple question about the shadow Chancellor of the Exchequer, and the hon. Member for Dover (Charlie Elphicke) asked him a clear question about the cost of Labour’s proposals. The answer is not written down anywhere, so may I ask—this is the 24th time—about the amount and cost of borrowing that would result from Labour’s tax proposals?

Peter Dowd Portrait Peter Dowd
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The hon. Member for Aldershot (Leo Docherty) might not like the answer that I gave to his question, but I have referred him to the documentation. If the hon. Lady is incapable of going to the internet and looking up the facts and figures, it is not for me to do that for her. The bottom line is that there is nothing in the Bill for public sector workers, who head into the new year with their wages continuing to fall and the cap sticking.

Alex Burghart Portrait Alex Burghart (Brentwood and Ongar) (Con)
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Will the hon. Gentleman give way?

Peter Dowd Portrait Peter Dowd
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No; I am going to make some progress. Public sector wages are now at their lowest level as against private sector pay for 20 years. Nor is there anything to address the botched roll-out of universal credit, which will cause real suffering to families this Christmas. Similarly, the Bill contains no measures to redress the disproportionate effect of austerity on women, and particularly on black and minority ethnic women. Instead, the Bill proposes a stamp duty cut that will, according to OBR analysis, increase house prices; and it fails to introduce measures to encourage the building of affordable homes to address the housing crisis.

The Bill includes plans to continue with the Government’s 2015 bank levy cut. It goes further, as the Minister seemed proudly to proclaim, by exempting all foreign banks from the levy and ensuring that from 2021, all banks will only have to pay the levy based on their UK balance sheets.

Vicky Ford Portrait Vicky Ford
- Hansard - - - Excerpts

Looking back in history, the Conservative-led Government introduced the bank levy in 2011, but Labour voted against it. In 2015, we introduced the 8% surcharge so that banks would pay more. Again, the Conservatives voted for that, but Labour voted against it. Why is the hon. Gentleman now rewriting history?

Peter Dowd Portrait Peter Dowd
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It is not a question of rewriting history. We do not support Bills that continue austerity year in, year out. The Government got rid of the bankers’ bonus tax, which brought in significantly more money than the bank levy. My hon. Friend the Member for Birmingham, Selly Oak (Steve McCabe) referred to the bank levy earlier. I happen to have some figures here, which I will share with him if the Minister does not want to answer his question. Taxpayers bought £76 billion of shares in the Royal Bank of Scotland and Lloyds and contributed £250 billion in guarantees, another £280 billion in insurance and a further £100 billion in annual implied subsidy, according to the Bank of England, so we are asking for the bankers to pay a little bit more, after the billions of pounds that we spent on helping to bail them out.

While we are on the subject of regulation, let me say that in August 2007 the right hon. Member for Wokingham (John Redwood) produced a report on “Freeing Britain to Compete”, which was ratified by the Conservative party in opposition. In paragraph 6.1, he said in effect that we should not be regulating the banks so much and that the Labour Government were regulating them too much. He went on to say that the Labour Government claimed that if they did not regulate the banks so much, the banks would “steal” all “our money”. Many people believe that is right, especially when they look at the figures and the facts on the bail-out of the banks.

Vicky Ford Portrait Vicky Ford
- Hansard - - - Excerpts

Will the hon. Gentleman give way?

Leo Docherty Portrait Leo Docherty
- Hansard - - - Excerpts

Will the hon. Gentleman give way?

Peter Dowd Portrait Peter Dowd
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I will give way to the hon. Gentleman, but then I must make some progress.

Leo Docherty Portrait Leo Docherty
- Hansard - - - Excerpts

I know Labour Members are not necessarily very good at numbers, but for the benefit of people watching, will the hon. Gentleman say very clearly how much his proposed policies will cost, including the renationalisation of our major industries? Will he give us a figure, and where does he expect the money to come from?

Peter Dowd Portrait Peter Dowd
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I am not quite sure whether the hon. Gentleman is actually listening to anything I say. I am not going to repeat what I have said. If we continue to have spurious interventions like that one, it prompts the question: what is the point? [Interruption.] It is the third or fourth such intervention.

The bottom line is simple: the bank levy will take £4.7 billion less in tax revenue, and this at a time when the crucial services on which many children and families rely are at risk of collapse.

None Portrait Several hon. Members rose—
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Peter Dowd Portrait Peter Dowd
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I will not give way.

In addition to the funding crisis in the NHS, social care and the police, which my hon. Friend the shadow Policing Minister has highlighted so effectively, there is a developing and significant funding crisis in children’s services, which face a £2 billion funding gap by 2020. Last year, 72,000 children were taken into care, while the number of serious child protection cases has doubled in the past seven years, with 500 new cases initiated each day. There are stresses on other parts of children services, including, among others, child and adolescent mental health services, school transport, and education, health and care plans. All are inadequately funded, with the buck passed to professionals who are already hard pressed to manage and deliver services.

Kevin Hollinrake Portrait Kevin Hollinrake (Thirsk and Malton) (Con)
- Hansard - - - Excerpts

Will the hon. Gentleman give way?

Stephen Lloyd Portrait Stephen Lloyd (Eastbourne) (LD)
- Hansard - - - Excerpts

Will the hon. Gentleman give way?

Peter Dowd Portrait Peter Dowd
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I will come back to each hon. Gentleman in a moment.

All of this is directly linked to the Government’s cuts to local authority budgets, which has meant a 40% reduction in resources for early intervention to support children and families. Central Government funding has also been cut by 55% over the past seven years, representing a cost of about £1.7 billion. The message from the Conservatives is quite clear: if you are a banker, you can expect a handout, but if you are a child at risk, do not expect a hand-up—you are on your own.

Despite the recent revelations in the Paradise papers, there are few serious avoidance measures. The UK accounts for 17% of the global market for offshore services, and the UK is at the heart of a network of offshore tax havens that aid and abet tax avoidance across the globe; yet the Government continue to ignore the Labour party’s calls for a public register of the information already provided by overseas territories or to take any meaningful action to tackle tax avoidance. Similarly, there is nothing in the Bill to address the huge resource crisis that HMRC is facing and the effect of that crisis on its ability to tackle tax avoidance and bring tax dodgers to justice.

Stephen Lloyd Portrait Stephen Lloyd
- Hansard - - - Excerpts

I want to enhance exactly what the hon. Gentleman is saying. Does he agree it was absolutely appalling that the Chancellor of the Exchequer and the Government completely ignored the 5,000 headteachers who said their schools are desperate for more money? The Tories have ignored them.

Peter Dowd Portrait Peter Dowd
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The hon. Gentleman is right. The only people to whom the Government seem to pay attention are the DUP and right-wing Tories.

The bottom line is that, since 2010, HMRC’s staffing levels have been reduced by 17%. The Bill creates even more powers for revenue and customs officers, with even more work, but very little if any resource to go with it.

Gareth Thomas Portrait Gareth Thomas
- Hansard - - - Excerpts

I know that my hon. Friend is a proud Liverpudlian, but on his point about children’s services, may I tell him—Londoners will agree—that over two thirds of London councils are reporting a huge increase in demand for very expensive placements? I hope he agrees that it would be good to hear from the Exchequer Secretary, when he winds up the debate, how the Government will help local authorities—particularly those in London, but also others across the country—to deal with that huge increase in the pressure on children’s services.

Peter Dowd Portrait Peter Dowd
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I say to my hon. Friend that—to use an old phrase—he should not hold his breath.

The Government need to wake up and face the cold, hard reality that the Exchequer is losing billions every year and letting multinationals, which do not pay their fair share, off the hook because HMRC simply does not have the resources.

Kevin Hollinrake Portrait Kevin Hollinrake
- Hansard - - - Excerpts

The hon. Gentleman is very clear and honest in his plans about wanting to spend a lot more money—half a trillion pounds in manifesto commitments—but at the same time the manifesto said that Labour would reduce the national debt. How is that possible?

Peter Dowd Portrait Peter Dowd
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I have the greatest respect for the hon. Gentleman, but I refer him to the answer I gave earlier. He should have a look at and dig into the documents, which are very easy to find.

The bottom line is that, wherever they are in the country, businesses that play by the rules are disadvantaged, so it is unfair not just to individual taxpayers but to business taxpayers. Meanwhile, back in Westminster, the Government continue to have absolute contempt for parliamentary oversight.

Peter Dowd Portrait Peter Dowd
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I will give way to the Minister, who may tell me that the Government do not have such a view.

Mel Stride Portrait Mel Stride
- Hansard - - - Excerpts

The hon. Gentleman is being very generous in accepting interventions. From what I can understand, every time the shadow Chief Secretary is asked a question about what Labour promises and pledges will cost, he reverts to saying that people can go and look it up: they can dig into the documents and get on the internet. Equally, he is saying that the public are shifting his way. Is his message to the electorate to get on the internet and to look at his policies in order to understand them?

--- Later in debate ---
Mel Stride Portrait Mel Stride
- Hansard - - - Excerpts

I had largely made my point, but if I am to have a second bite at the cherry, let me just add a final point. Is the shadow Chief Secretary’s message to the great British electorate that when it comes to costing his own party’s plans, they should get on the internet and start googling to find out what those costs are?

Peter Dowd Portrait Peter Dowd
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My message to the great British public, who have showed their support for Labour on this, is to get out and vote Labour. That is the message. The other point is that the Minister’s hon. Friends have been waving an iPad around. I suggest they get on their parliamentary iPads and do their work.

Ruth George Portrait Ruth George (High Peak) (Lab)
- Hansard - - - Excerpts

Does my hon. Friend agree that it is a bit ironic to be asked to take lessons in finances from a Government who have doubled the debt and doubled austerity at the same—[Interruption.]

Peter Dowd Portrait Peter Dowd
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My hon. Friend is right. Of course, as ever with the Tories, when we tell them the truth, we get shouted down, which is exactly what has just happened to her.

By refusing to base the Finance Bill on an amendment of the law resolution, the Minister has deliberately restricted the scope of amendments to this Bill, and the ability of the Opposition to scrutinise it properly and improve it. I know the Financial Secretary was president of the Oxford union and his debating skills were honed in its atmosphere, but I am sure he would never have dreamed of putting the same restrictions on the debates he chaired as his colleagues are putting on debates in this Chamber of the mother of Parliaments. What is good enough for the Oxford union should be good enough for this place. “No gagging” is the call from the Opposition; the Government instead want a muffled and restricted debate. That is why this measly Bill contains few policy and tax changes, and will have no positive or constructive impact on the majority of ordinary people’s lives.

None Portrait Several hon. Members rose—
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Eleanor Laing Portrait Madam Deputy Speaker (Mrs Eleanor Laing)
- Hansard - - - Excerpts

Order. The hon. Gentleman is not giving way.

Peter Dowd Portrait Peter Dowd
- Hansard - -

Thank you, Madam Deputy Speaker.

Mind you, anything to avoid even more embarrassment for an enfeebled Prime Minister. Our stretched public services and crumbling infrastructure desperately need investment. We need bold, imaginative and innovative answers to tackle our slowing economic growth and falling productivity and to give workers the pay rise they deserve.

As my hon. Friend the Member for High Peak (Ruth George) said, since 2010 the Government have added more than £720 billion to the national debt, yet they have failed at every opportunity to invest. Instead, they have borrowed record amounts just to cover day-to-day spending. Labour Members are clear: it is high time the Government borrowed to invest in infrastructure, jobs and skills that will grow our economy sustainably. That is not controversial, no matter how much Conservative Members fulminate about it. [Interruption.] Well, they can simply ask the Secretary of State for Communities and Local Government, who wants to borrow £50 billion to solve the housing crisis. Where will that money come from?

If we asked any business owner, they would tell us that they borrow to grow their business and, in so doing, they reap the rewards. They do not borrow to pay the day-to-day bills, as the Government have done, year after year. They borrow to invest—an alien concept to the Government. If this clapped-out Government are unwilling to invest in our people and our nation, its talent and its entrepreneurial spirit, I assure the Minister that the next Labour Government will.

We will invest in infrastructure across every region and nation to create high-wage, high-productivity jobs and start a large-scale house building programme, backed up with controls on rent. We will tackle debt, introducing further controls on high-interest, short-term lending, and we will scrap tuition fees.

While we are at it, we will lift for the whole of the public sector the public sector pay cap that has so damaged the morale of our staff in vital services. We will fix universal credit and put the compassion that the Government have sucked out back into our social security system. We will introduce a £10-an-hour real living wage that people can live off, not get by on. In doing all that, we will ensure that people in every region and nation, in every community and age group, have a Government that listen, act and ensure well-paid jobs, roofs over their heads and an economy that works for the many, not the few.

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Rachel Maclean Portrait Rachel Maclean
- Hansard - - - Excerpts

My hon. Friend is completely right. He reminds us of why we see so many Conservative Members representing Scotland, and I am proud to sit with them. Even though I have a Scottish surname, I am not from Scotland, but I love that part of our country. I am delighted that the Scottish people have Conservative representatives fighting for low tax.

Peter Dowd Portrait Peter Dowd
- Hansard - -

I like the logic of the hon. Lady’s analogy about giving people a tax cut and giving them a pay rise. Does she therefore agree with me that, by her logic, giving the bankers a cut in their levy is the biggest pay rise in this Budget?

Rachel Maclean Portrait Rachel Maclean
- Hansard - - - Excerpts

I am glad the hon. Gentleman made his intervention, because I would like to set the record straight. The Labour party talks a lot about banks. Shall we remind ourselves that it was the Labour party and Ed Balls—its former shadow Chancellor—who created the light-touch regime that led to the crashing of our entire economy? Millions of people were thrown out of their jobs; they lost their jobs and were in poverty because of the decisions of the former Chancellor of the Exchequer.

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Rachel Maclean Portrait Rachel Maclean
- Hansard - - - Excerpts

My hon. Friend is completely right and I fear that it may be a combination of the two issues. We know that Labour Members have been questioned on this point many times by journalists and usually their answer is, “Well, that’s not for us to say.” I do not know why it is not for them to say. Do Members not think the ordinary voter has a right to know what Labour would cut to pay for its policies? We have just heard from the hon. Member for Bootle that he is going to scrap tuition fees and renationalise all the industries, and yet he still says that all he is doing is—

Peter Dowd Portrait Peter Dowd
- Hansard - -

I referred earlier to “Freeing Britain to Compete”, and I have the reference here on my iPad. It said that we claimed

“that this regulation is all necessary. They seem to believe that without it banks could steal our money, bakers would put nails in our bread…and builders would construct houses that fell down when the wind blew.”

Does the hon. Lady agree that they might not have blown down but they burned down because of deregulation?

Rachel Maclean Portrait Rachel Maclean
- Hansard - - - Excerpts

I thank the hon. Gentleman for his intervention. I fear that the combination of the Labour Front-Bench team would be a lot, lot worse for our banks and for our country. Let us just look at the record, because he has mentioned that a few times. Under this Government banks are paying 58% more tax than under Labour. In 2016-17, the banking sector paid £27.3 billion in corporation tax, which represents an increase of £2.9 billion. That is going to pay for an awful lot of hospitals and schools, for the police service, and for roads and sanitation in our constituencies. It is certainly going to pay for a lot more of those things in Redditch.

I remind the hon. Member for Bootle that the average amount paid by the banks every year under the Conservative party is 13% higher than it was under Labour. HMRC data shows that the average annual amount of tax paid by the banking sector between 2010-11 and 2016-17 was £23.2 billion.

In conclusion, this Government and Conservative Members represent the true party for the many working people up and down this country.

Finance (No. 2) Bill Debate

Full Debate: Read Full Debate
Department: HM Treasury

Finance (No. 2) Bill

Peter Dowd Excerpts
Committee: 1st sitting: House of Commons
Monday 18th December 2017

(6 years, 3 months ago)

Commons Chamber
Read Full debate Finance Act 2018 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Committee of the whole House Amendments as at 18 December 2017 - (18 Dec 2017)
Mel Stride Portrait Mel Stride
- Hansard - - - Excerpts

I would maintain that the banks are indeed being treated rather differently from other sectors of the economy, not least—as I have been at great pains to point out this evening—because they are being taxed far more heavily than other types of business. On a fundamental issue of principle relating to tax confidentiality, it would not be right to single out any particular bank, whatever its history, to make an example of it and treat it differently from other financial institutions.

The changes in this schedule are part of a package of measures that provide a sustainable basis for raising revenue from the banking sector in the long term. These measures continue to apply additional taxes to banks, to reflect the special risk that they pose to the UK economy. They put the taxation of banks on a more certain and sustainable footing to ensure that the banks will continue to pay additional tax, and they reduce the impact of the bank levy on UK banks’ international operations. In doing this, we will ensure their continued health and competitiveness, which are essential for us if we are to go on raising yet more tax from our banking sector. I commend the clause to the Committee.

Peter Dowd Portrait Peter Dowd (Bootle) (Lab)
- Hansard - -

I rise to speak to the amendment and new clauses in the name of my right hon. Friend the Leader of the Opposition and others. Banks have a crucial role to play in the proper and smooth functioning of our nation’s economic wellbeing. In addition, it is important to ensure that the banks are not all lumped together with a one-size-fits-all approach for the purpose of a bank-bashing session, as was suggested by Conservative Members. Further, it is neither reasonable, fair nor sensible to homogenise the people who work in the banking sector as either saints or demons. Neither beatification nor demonisation of the banks is appropriate; it does no credit to the complexity of the landscape facing us. It is important when dealing with fiscal issues relating to banks that we keep a sense of proportion during the process. That is why it is important to ensure that, in an objective sense, we examine the context in which the Government have decided to cut the take from the bank levy. So, what is that context?

Alberto Costa Portrait Alberto Costa
- Hansard - - - Excerpts

Will the hon. Gentleman be fair enough to confirm at the Dispatch Box that since the Conservative party came into government in 2010, the tax take from the banking sector has increased, especially since 2015?

Peter Dowd Portrait Peter Dowd
- Hansard - -

I will come to that in the course of my speech.

I was asking about the context for these measures. First, there is the political context; then there is the ideological context. Politically, we saw a new low for the Government last week. We witnessed an increasingly weak and ineffectual Prime Minister being pulled between the troika of the Democratic Unionist party, her hard-line Front-Bench Brexiteers and, latterly, rebels on her own Back Benches.

Leo Docherty Portrait Leo Docherty (Aldershot) (Con)
- Hansard - - - Excerpts

The hon. Gentleman mentioned ideology. The shadow Chancellor is on record from 2013 as being a self-declared Marxist. Does the hon. Gentleman share that ideology? Is he a Marxist, too?

Peter Dowd Portrait Peter Dowd
- Hansard - -

The hon. Gentleman is nothing if not persistent in asking that question. We are dealing with the bank levy, not the political opinions of the shadow Chancellor. I will be happy in due course to pitch our policies against those of the Conservatives.

Alex Burghart Portrait Alex Burghart
- Hansard - - - Excerpts

Does the hon. Gentleman regret the fact that his party opposed the bank levy when this Government introduced it in 2011?

Peter Dowd Portrait Peter Dowd
- Hansard - -

I will come to that in due course as well, if I may. I am beginning to think that my staff have been leaking my notes. I shall have to have words with them.

Last week, in true one nation mode, the right hon. and learned Member for Beaconsfield (Mr Grieve), among others, gave the Brexit Front Benchers every opportunity to acquiesce to his reasonable requests. In effect, he tried to give them a “get out of jail” card, but they could not take yes for an answer, and the remnants of the Government’s credibility went down the pan. There is a civil war going on within the Government, and this goes to the heart of the matter. The Government are throwing everything into the mix to try to distract us from the civil war that is going on in the Tory party.

Alex Chalk Portrait Alex Chalk
- Hansard - - - Excerpts

I am grateful to the hon. Gentleman for talking about civil war. By contrast, in the interest of showing the solidarity among Labour Members, does he agree with the shadow Chancellor’s listing of his hobby in “Who’s Who?” as

“generally fermenting the overthrow of capitalism”?

Peter Dowd Portrait Peter Dowd
- Hansard - -

I know that the hon. Gentleman was disappointed when he was unable to ask that question last week because the Whips wound up his ability to do so. The reality is that that is of absolutely no relevance to the matter in hand. It does not matter; it is a complete irrelevance. We are in danger of getting swamped by red herrings.

Dan Carden Portrait Dan Carden
- Hansard - - - Excerpts

On the topic of the shadow Chancellor, it was he who called for an independent assessment of the bank levy, the balance between fairness and competitiveness, and how the Government’s calculation was arrived at. Does my hon. Friend support the shadow Chancellor in that call?

Peter Dowd Portrait Peter Dowd
- Hansard - -

Of course I am more than happy to support the shadow Chancellor, because that is the very point that we are trying to make—[Interruption.] I referred to red herrings a moment ago, and I hear Conservative Members mentioning Marxist herrings. That is very witty; it is nice to hear a witty comment from the Conservative side on occasions.

Rachel Maclean Portrait Rachel Maclean
- Hansard - - - Excerpts

The hon. Gentleman refers to red herrings, but surely the views and political ideology of his shadow Chancellor are relevant. I will therefore give him another opportunity to answer the question: is he a Marxist, like his fellow shadow Treasury spokesman? Does he agree with that ideology, or is there civil war in the Labour party as well?

Peter Dowd Portrait Peter Dowd
- Hansard - -

I think that the shadow Chancellor is more interested in Groucho Marx than Karl Marx, quite frankly.

James Cartlidge Portrait James Cartlidge
- Hansard - - - Excerpts

It is very kind of the hon. Gentleman to take so many interventions on the trot. [Laughter.] This is not a minor issue. Let us not forget that Marxism destroyed the economy of half our continent. I very much admire the hon. Gentleman, but he did mention ideology in the first place. It is therefore not only in order for me to raise the question in his terms, but pertinent. Is he a Marxist—or is he perhaps a Leninist, a Bolshevist, or an adherent of one of the various other isms?

Roger Gale Portrait The Temporary Chair (Sir Roger Gale)
- Hansard - - - Excerpts

Order. It may be in order in the hon. Gentleman’s terms, but it is not in order in my terms. I should like to return to the bank levy.

Peter Dowd Portrait Peter Dowd
- Hansard - -

Thank you for bringing us back to the land of reality, Sir Roger. I very much appreciate it.

Jim Cunningham Portrait Mr Jim Cunningham
- Hansard - - - Excerpts

Let us get real and say to the Government that at the end of the day, when we are in government, our Chancellor will carry out the policies of that Labour Government, whatever his personal views are. More importantly, many comments have been made about the previous Labour Government tonight, but the previous Chancellor said that it was not the Labour Government who created the financial crisis. If we had not capitalised the banks, many of those on the Conservative Benches would be in the poorhouse today.

Peter Dowd Portrait Peter Dowd
- Hansard - -

As ever, my hon. Friend makes a reasonable point. The Government are so lacking in confidence that they are gerrymandering Public Bill Committees to reflect their control-freakery. We have to ask ourselves how long the Government can treat the House with such disdain. It is the kind of disdain that saw the Government ensure that there was no amendment of the law resolution, which has deliberately restricted the scope of the Bill and effectively limited parliamentary scrutiny and debate. [Interruption.] A Whip says from a sedentary position that that has happened before, but the procedure is used rarely and not in these circumstances. It is the Government’s control-freakery and fear of scrutiny that makes them do such outrageous and virtually unprecedented things.

Perhaps if the Bill set out a bold plan—let us call it a long-term economic plan—to get the economy back on track, we could all put up with the Government’s guileful procedural gymnastics. However, as I said on Second Reading, there is little in the Bill to solve the growing problems facing our economy—from sluggish growth and slow productivity to a lack of investment in our infrastructure and our people. The Government have instead decided to dedicate their efforts to offering the banks another tax break by further limiting the scope of the bank levy, ensuring that from 2020 UK banks will pay the levy only on their UK balance sheets, not their overseas activities. It is the same old Tories looking after the same old interests.

Peter Dowd Portrait Peter Dowd
- Hansard - -

I will give way.

Alex Burghart Portrait Alex Burghart
- Hansard - - - Excerpts

I am very grateful. I want to give the shadow Minister another opportunity to answer the question. Does he regret his party’s decision to vote against the bank levy in 2011?

Peter Dowd Portrait Peter Dowd
- Hansard - -

I will come to that in a moment. In future, if two hon. Members want to make an intervention at the same time, they should perhaps have a ballot.

Peter Dowd Portrait Peter Dowd
- Hansard - -

I will take an intervention from the hon. Gentleman.

Leo Docherty Portrait Leo Docherty
- Hansard - - - Excerpts

The hon. Gentleman mentioned tax. If we had a Labour Government, by how much would corporation tax rise?

Peter Dowd Portrait Peter Dowd
- Hansard - -

We discussed this issue last week, but the bottom line is that we are here to talk about the tax policies of the Government, not the Labour party. I suggest that the hon. Gentleman reads “Funding Britain’s Future”, which we call the grey book. As I said to one of his colleagues last week, I am not his research assistant. The Independent Parliamentary Standards Authority provides the hon. Gentleman with enough money to employ his own research assistant, so he should not need a shadow Minister to do his research for him.

Labour’s position on the bank levy has been clear. We have consistently argued for a higher bank levy and pointed out that the levy, introduced in 2011, would raise substantially less then Labour’s bankers’ bonus tax. In short, we have always stood against the Government’s divisive austerity agenda. That was why we voted against the 2011 Finance Bill, which introduced the bank levy along with cuts to corporation tax and tax giveaways for the most well-off. That was also why we voiced our concern in 2015 over the Government’s cuts to the bank levy and the introduction of a corporation tax surcharge. It is why we will vote against the measures in the Bill.

Alex Burghart Portrait Alex Burghart
- Hansard - - - Excerpts

Given the hon. Gentleman’s love of punishingly high corporation tax, does he not regret supporting the corporation tax surcharge on banks in 2015, when he was in the House?

Peter Dowd Portrait Peter Dowd
- Hansard - -

No matter how many times Government Members ask rather tangential questions, I will not be drawn down that particular avenue, much as I would love to have that debate with the hon. Gentleman. The bottom line is that we have always stood against this Government introducing austerity measures at the same time as giving banks a tax cut. That is what it comes down to.

Stephen Kerr Portrait Stephen Kerr (Stirling) (Con)
- Hansard - - - Excerpts

Will the shadow Minister give way?

Peter Dowd Portrait Peter Dowd
- Hansard - -

No, I will push on for a moment.

It is worth pointing out that the bank levy was not the brainchild of a Conservative Government. It was not introduced by the previous Chancellor after he had listened to the clear public outrage aimed at the reckless decisions made by some in the banking sector, who plunged the world into one of the greatest economic crises in modern times. As much as Government Members would like to blame the Labour Government for a world financial crisis, that is stretching credibility a little too far. [Interruption.] It is nice to see that the Chief Secretary to the Treasury is shouting across the Chamber, but I cannot quite hear her, so if she wants to intervene—or shout a little louder—so that I can actually hear her question, I will be more than happy to answer. It is nice to see her in the Chamber.

Jim Cunningham Portrait Mr Jim Cunningham
- Hansard - - - Excerpts

It is probably right to look at the history, rather than listening to the made-up stuff coming from Conservative Members. Let us be clear that the financial crisis started with Lehman Brothers in America. We recapitalised the banks, and we kept our triple A rating so that we could borrow to bail out the banks in the first place. The Government are trying to take the credit for something that they did not do.

Peter Dowd Portrait Peter Dowd
- Hansard - -

My hon. Friend is right. Conservatives always try to take the credit. They take responsibility for the good things and no responsibility for the bad things—it is the way they are made.

The banking levy was not designed to ensure that the banks received enormous and unprecedented bail-outs from the taxpayer, such as the £76 billion of shares the Government purchased in RBS and Lloyds. It was designed to make them pay their fair share. In fact, the very concept of a levy was developed at the G20 summit in Pittsburgh in 2009. It was championed by the previous Labour Government, who subsequently introduced the bankers’ bonus tax. In the coalition’s 2011 austerity Budget, the Government decided to dump the bankers’ bonus tax and adopted the bank levy. At the time, Labour made it clear that the levy threshold was far too low in comparison with the money that would be raised if the Government stuck with Labour’s bonus tax. Instead, Ministers wilted under pressure from the banks and set the levy at a puny £2.6 billion.

James Cartlidge Portrait James Cartlidge
- Hansard - - - Excerpts

The hon. Gentleman is talking about where the bank levy came from. I remind the Committee that it was actually Geoffrey Howe who introduced a deposit levy in a Budget in the early ’80s as part of his stabilisation of the financial system inherited from a previous Labour Government.

Peter Dowd Portrait Peter Dowd
- Hansard - -

I thank the hon. Gentleman for that history lesson.

Gareth Snell Portrait Gareth Snell (Stoke-on-Trent Central) (Lab/Co-op)
- Hansard - - - Excerpts

If we are talking about the 1980s, let us remember that corporation tax spiked to over 50% in 1983 under a Conservative Government. Government Members are giving us lectures, but they should perhaps look at their own history rather than judging ours.

Peter Dowd Portrait Peter Dowd
- Hansard - -

That is a fair comment.

The threshold was established despite Treasury officials considering it to be far too low. Under the original plans, the levy would have raised £3.9 billion a year—nearly £1.5 billion more than £2.6 billion—but the Government of the few ensured that the threshold remains low.

At 0.078% for short-term liabilities and 0.039% for long-term liabilities, the level set was—not to put too fine a point on it—an embarrassment when compared with that in other countries that introduced a similar levy. It was less than a third of France’s level, substantially smaller than Hungary’s, which was set at 0.53%, and even lower than that of the USA. They are all well-known Marxist countries.

In 2015, under pressure from the Minister’s and the Government’s chums, once more the then Chancellor cut the bank levy rate, and the current occupant of No. 11 has continued on that sojourn. In so doing, he has ensured that, by 2020, the UK’s biggest banks will have received a tax giveaway worth a whopping £4.7 billion. That is £4.7 billion that could have been spent on our public services—notably on children’s services, for example.

Stephen Kerr Portrait Stephen Kerr
- Hansard - - - Excerpts

It is all well and good for the hon. Gentleman to say what he is saying, but he is neglecting a simple fact. The financial sector is paying 35% more in tax today than it did in 2010 under a Labour Government.

Peter Dowd Portrait Peter Dowd
- Hansard - -

Yes, because the sector returned to profitability after a Labour Government supported it throughout. That is why the sector has returned to profitability. Ultimately, if a Labour Government had not gone in and supported the sector, there would have been no banks, no profits and no tax whatsoever. I remind the hon. Gentleman of that one.

Alex Burghart Portrait Alex Burghart
- Hansard - - - Excerpts

I am enjoying the hon. Gentleman’s potted Marxist history of the past 10 years. There seems to be a little bit of history that he has forgotten, which is of course the lax and inappropriate regulatory regime that the Labour party introduced under Ed Balls. That regime contributed to the terrible state in which our banking sector was left after 2008. Perhaps the hon. Gentleman would like to remind the Committee and his party of that.

Peter Dowd Portrait Peter Dowd
- Hansard - -

First, we did not regulate the banks in the United States, where it all started. I ask the hon. Gentleman—I have said this a number of times—to go and look at “Freeing Britain to Compete,” the document produced by the right hon. Member for Wokingham (John Redwood) for the shadow Cabinet in, surprisingly, August 2007.

Peter Dowd Portrait Peter Dowd
- Hansard - -

“They were not the Government” is shouted across the Dispatch Box, but that brings me to the point I am making. The bottom line is that chapter 6 of “Freeing Britain to Compete” called for significantly less regulation of the banks. As I have said before, the right hon. Member for Wokingham effectively said in that document that the Labour Government at the time believed that, if we did not regulate the banks, they would steal all our money. Many people out there believe that that is, in effect, what happened. The taxpayer had to bail out the banks. Why did the taxpayer have to bail them out? Because of the lack of regulation. The shadow Cabinet at the time ratified a policy of less regulation. If we had followed the right hon. Gentleman’s exhortations, as ratified by the shadow Cabinet, we would be in an even worse state. I ask the hon. Member for Brentwood and Ongar (Alex Burghart) to go and have a look at that one.

Rachel Maclean Portrait Rachel Maclean
- Hansard - - - Excerpts

The hon. Gentleman is discussing the strictures and exhortations of my right hon. Friend the Member for Wokingham (John Redwood), who was then an Opposition Back Bencher. Surely the hon. Gentleman must recognise that it was the Labour party, in government, that deregulated the banks and took power away from the Bank of England. Whatever my right hon. Friend may or may not have said—he is an incredibly intelligent and learned person—he was not in government and was not making policy. It was the Labour Government who made the policy to deregulate and allow the financial crisis by taking away strength from the Bank of England at a time when it should have been strengthened.

--- Later in debate ---
Peter Dowd Portrait Peter Dowd
- Hansard - -

If the hon. Lady wants to take back to the Conservative party the independence of the Bank of England, she should feel free. We will not support it— [Interruption.] That is what I heard her say. She was complaining about the independence of the Bank of England. So a new policy has been introduced by the Conservatives to take away the independence of the Bank of England.

To offset the cuts to the bank levy, the Government introduced the 8% corporation tax surcharge, which they falsely claimed would offset the reduction. If we look at their Red Book and the forecasts from the Office for Budget Responsibility, however, we can clearly see that the surcharge will not make up the fall in the bank levy. Under the forecasts, the surcharge is set to increase by £0.3 billion a year, while the receipts the Exchequer receives from the levy will fall by £1.7 billion a year, which is a £1.4 billion gap. That is a fact. That is in the Government’s own Red Book.

Dan Carden Portrait Dan Carden
- Hansard - - - Excerpts

I am grateful to my hon. Friend and constituency neighbour for giving way. There is a lot of displacement activity coming from Conservative Members in the form of interventions. This is the second debate I have attended on the Finance Bill in which not one Conservative Member has mentioned living standards, wages, public sector pay or any real life conditions.

I encourage my hon. Friend to carry on with his speech and to talk about the review that should take place into the bank levy and the real life consequences of this Tory Government’s policies.

Peter Dowd Portrait Peter Dowd
- Hansard - -

I thank my hon. Friend for his advice, which I will take.

In 2017, we are still feeling the effects and economic consequences of the actions of the banks. Every day we are told by the Government that there is no money to invest and that austerity must continue, yet the Government have gone out of their way to undermine any remuneration from the banks that caused this sorry state of affairs in the first place.

Once again, the Opposition’s ability to amend this Bill is hamstrung and limited by the Government’s continued use of arcane and outdated parliamentary procedure. In football parlance, not only have they moved the goalposts but they have put boards across the goalmouths so that the Opposition cannot score any goals—a recreant act, if ever there was one, from a pusillanimous Government frightened of their own shadow.

By tabling new clause 1, we seek, first, to require the Government to carry out a review of the bank levy, including its effectiveness in relation to its stated aims—Sir Roger, you will be glad that we are back on the bank levy. Secondly, we seek to establish the extent of the revenue effects of the cuts made in 2015. Thirdly, we seek to calculate how much would have been raised if the Government had stuck with Labour’s bankers bonus tax. Let us have the comparisons.

Such a report would shine a light on the Government’s malpractice in cutting frontline services while offering tax giveaways to the banks. It would require the Minister to reassure the House directly that certain banking practices are not simply in hibernation. “Once bitten, twice shy” is a fair assessment of most people’s views, including many in the sector itself. A by-product of the process would be to show that far more would have been raised under Labour’s bankroll tax.

We are also calling for a separate review of the changes introduced by clause 33 and schedule 9 and their overall impact on revenue and risky behaviour. That review would make the Treasury explain the rationale for further limiting the scope of the bank levy and forgoing billions of pounds while, at the same time, pushing for more cuts to departmental budgets and frontline services.

It is, of course, unsurprising and indicative of the Government that they have failed to keep track of the banks that regularly pay the levy and a full list of what they have paid. That is why, in the name of transparency—a very novel concept for the Government—we would ensure fiscal accountability. The Opposition have tabled an amendment that seeks to create a public register for the bank levy.

The Minister talks about commercial sensitivity. Well, that old chestnut is brought out time after time. When we supported the banks with billions upon billions of pounds, nobody talked about commercial sensitivity then. In this particular case, I am sure many in the banking sector would be happy to have such transparency. It is shocking that the Government consider this tax cut for the wealthy few to be a good use of nearly £5 billion.

Alongside demanding that the Government change course, we must also understand the impact of the lower levy rate introduced in 2011, as well as the revenue effects of lowering the levy in 2015. That, among other things, is what our amendment seeks to tease out.

Robert Jenrick Portrait Robert Jenrick
- Hansard - - - Excerpts

I am confused by the hon. Gentleman’s position on the bank levy. He says that he voted against it in 2011 because it was set at too low a threshold, but between 2011 and 2015 the then Chancellor raised the bank levy seven times and, on each occasion, the Labour party voted against it. Why did it do that?

Peter Dowd Portrait Peter Dowd
- Hansard - -

I suggest that the hon. Gentleman goes back and reads Hansard when it is printed to see exactly what I said.

Once we can see the true costs of the Government’s policies, we can grasp the extent of the choices they have been making and how they have favoured a small, wealthy group over the many citizens of this country time and again. Let us look at the example of children’s services. Only a week before the Budget, the chief executive of Action for Children, Sir Tony Hawkhead, described the “devastating cost” of cuts to children’s services, which he said have been left on a “dangerous and unstable” footing. These prevention and protection services are vital to provide proper care for our nation’s children, and the banking levy could help with that, yet we have seen deep cuts of 55% of funding for local government and a gap of £2 billion in funding by 2020.

There is widespread talk and reports of local councils having to seek permission from the Government to raise council tax to cover the costs, in effect, of cuts to the bank levy—this money may have been available for children. So cuts to bankers and council tax up seems to be what we are being told today. As these services have been decimated over the past seven years, we have seen a doubling of serious child protection cases and twice the number of children put into care protection plans. Last year, 70,000 children were placed into care. The support for foster care, adoption and Sure Start children’s centres has all been reduced. Youth centres are closing and parenting classes are being axed. Short breaks for disabled children, provided by local councils to give their parents a little respite from full-time care, are being taken away and are under strain.

Taken together, those cuts mean that some of the most vulnerable children in our country are paying the price for seven years of failing economic strategy. When are the Government going to change their strategy? It is still shocking to see the Government put the needs of others ahead of those of our youngest citizens, who are picking up the bill for austerity

Alex Burghart Portrait Alex Burghart
- Hansard - - - Excerpts

Will the hon. Gentleman not acknowledge that, as we have reduced the rate of corporation tax, so revenues have increased and there is now more money to spend on public services than there would otherwise have been? Does he not acknowledge that there is a real risk that, if his party were to increase corporation tax rates, there would be less money coming in, and cuts to public services and so on would be on his party’s head?

Peter Dowd Portrait Peter Dowd
- Hansard - -

In short, no. The Institute for Fiscal Studies has made no link whatsoever between the rate of corporation tax and tax take. This is one of these myths that have been presented to the House time after time, which in the main we have tried to ignore, but at some point we have say that it is complete and utter claptrap, not to put too fine a point on it.

The banking surcharge, supposedly introduced to compensate the taxpayer for this levy loss, will not come close to making good the difference. The Chancellor still has a choice though: he could reverse the cut to the bank levy and end the crisis in our children’s services instead.

It is increasingly clear that the oldest political party has run out of steam.

Lucy Frazer Portrait Lucy Frazer (South East Cambridgeshire) (Con)
- Hansard - - - Excerpts

Does the hon. Gentleman therefore think that France’s recent proposal to cut taxes for higher earners in order to woo bankers over to France is an incorrect policy, and that France has got it wrong because low taxes do not encourage investment and growth in a country?

Peter Dowd Portrait Peter Dowd
- Hansard - -

The only thing that is going to attract people over to France is the shambles that the Government have made of their Brexit negotiations. That is a significantly bigger factor than, for example, the banking levy.

Gareth Snell Portrait Gareth Snell
- Hansard - - - Excerpts

France has a corporation tax rate of 33%, so I am not entirely sure the point the hon. and learned Lady was making is valid. Would my hon. Friend care to comment on that?

Peter Dowd Portrait Peter Dowd
- Hansard - -

My hon. Friend is right on that. Other countries, including the United States, have a corporation tax of 36% and the German rate is higher than ours, so even if we went back to the 2010 level of 26% that we had under a Labour Government, we would still have the lowest rate of all our competitors. That is the reality. Interestingly, they are doing much better than we are, notwithstanding that higher level of corporation tax.

Stephen Lloyd Portrait Stephen Lloyd
- Hansard - - - Excerpts

Does the hon. Gentleman agree that the Conservative party continues to cut corporation tax aggressively, but that perhaps next year rather than cutting it still further it might take that money to ensure that the WASPI women—the Women Against State Pension Inequality Campaign—get a fair transition payment?

Peter Dowd Portrait Peter Dowd
- Hansard - -

There are many, many calls on the taxpayer, and that is one of them. The Government would do well to pay attention to the exhortations of the hon. Gentleman.

Peter Dowd Portrait Peter Dowd
- Hansard - -

I am more than happy to give way in relation to corporation tax, but it is important that I maintain the theme of the austerity project. It has not led us to prosperity. It has delivered misery for this country, yet the Government stick to the same old rules: tax breaks for wealthy bankers and cuts for the rest of us. It is like a stuck record.

James Cartlidge Portrait James Cartlidge
- Hansard - - - Excerpts

I am sure that, coming from where he does, the hon. Gentleman takes a close interest in the Republic of Ireland, a country he has not mentioned. Is he aware that, by keeping its corporation tax rate low, it has revolutionised its economy and become an export tiger, and that that has been a key factor in helping it to recover from the crash?

Peter Dowd Portrait Peter Dowd
- Hansard - -

Huge amounts of support from the European Union have revolutionised the Irish economy. My forebears came from Ireland, but I do not think even the Irish would compare themselves as a small country of 3.5 million people or thereabouts with the United Kingdom with its 60 million—this is chalk and cheese. The hon. Gentleman will appreciate that that is a ridiculous comparison to make in the debate.

Our amendment will finally help to demonstrate the true cost to the public purse of the Government’s favourable approach to some. In that way, we can understand exactly what the cost in revenue is. This should be all the evidence the Government need to change course—things simply are not working. Productivity is low, inflation is up, wages are stagnating, public services are in absolute decline and the NHS is under strain, as is social care, yet the Government just do not get it. They seem to think that we live in Shangri-la, but, unfortunately, we do not. We know that the Conservative party relies on support from vested interests for its own survival, but the question we must ask ourselves is: should the survival of a clapped out, atrophying, self-centred, out-of-touch, diminished Tory party take precedence over the needs of children? I know the answer, so I will simply leave Conservative Members to answer it in the silence and solitude of their own consciences.

Stephen Kerr Portrait Stephen Kerr
- Hansard - - - Excerpts

It is my great privilege to follow the hon. Member for Bootle (Peter Dowd), whose speech was greatly entertaining, if a little devoid of something approaching accurate history. We were treated to a festival of revisionism on this country’s economic history over the past 10 years. I did agree with one thing he said—it was almost the first thing he said—which was that it is wrong to create a single category to describe bankers. He alluded to the fact that some may be called saints and others may be called sinners—he may have said that, but I cannot recall exactly the term he used—and that is undoubtedly the case, so to generalise about banking and bankers, as we often hear Opposition Members do, is extremely rash.

As for culpability for the events from the end of 2007 to 2009, the hon. Gentleman may wriggle on the issue, but the fact is that the Labour Government were indeed culpable, as were other politicians of that time who were holding senior office in this country, including the then First Minister of Scotland, Alex Salmond, who positively encouraged the Royal Bank of Scotland to engage in some of the more reckless initiatives that the leadership of that bank were engaged in. The result was that not only did they upend a great Scottish institution, but they nearly upended the whole United Kingdom economy.

--- Later in debate ---
Stephen Kerr Portrait Stephen Kerr
- Hansard - - - Excerpts

I thank the hon. Gentleman for his comment. In fact, I have made representations to Ministers—as have my colleagues on the Government Benches—because of the impact that the closure of the bank branches, particularly the recent announced closures of the Royal Bank of Scotland branches, will have on communities such as the one from which I come in Bridge of Allan. I do have concerns about the capabilities of the Post Office branches to be able to deal with the kinds of cash amounts that they will now have to handle. It is a different scale of operations that they will have to be prepared to lift themselves to. Yes, I have made representations, and I will continue to do so. In fact, there is an Adjournment debate on the subject following these debates.

Peter Dowd Portrait Peter Dowd
- Hansard - -

Does the hon. Gentleman agree that using state money to keep banks open in local communities amounts to Marxism?

Stephen Kerr Portrait Stephen Kerr
- Hansard - - - Excerpts

Well, I have mentioned what I did in my earlier years. In all those years, I was never accused of being a Marxist. I am concerned when communities become devoid of a basic service, such as a bank branch of any description. Frankly, I consider it to be unacceptable. These banks have had so much money from the British people and have been bailed out by them. I have already mentioned the recklessness of the banks, particularly of the Royal Bank of Scotland, for which I do not apologise.

I should say that I did actually work for the Royal Bank of Scotland when I left school. Perhaps I should have mentioned that earlier. [Hon. Members: “Yes, you should.”] I was 16 at the time. I was a junior bank officer for RBS at the East High Street branch in Forfar. The Royal Bank of Scotland is a great institution. I just pause to pay tribute to its staff because they do a great job, and they have done a great job over these past 10 years in particular in very great difficulties. I pay them my compliments for that. Nevertheless, it does not excuse the Royal Bank of Scotland. In addressing the bank levy, it is important to remember that the greed and the calumny that they were guilty of means that they owe the British people something more. I fully acknowledge that that something more has been extracted and is being extracted, but I also think that there is a case for them having the social responsibility to maintain a presence in the communities of my constituency, such as in Bannockburn, Dunblane, Bridge of Allan and the rural parts of the constituency. I am afraid that a mobile bank does not quite meet the need.

The other consequence is that many more empty units are appearing on our high streets. That is on top of the units that have been left empty by the Scottish Government and their inaction on business rates. I was about to say, Sir Roger, that I wish that I could show you the picture of King Street in Stirling, but, in retrospect, I am glad that I cannot, because there are so many empty units and so many “to let” and “for sale” boards. That is a situation that leaves someone such as me, who loves Stirling and the great history of my constituency and everything that it stands for, more than a little concerned. There is a feeling that we need to see a change in this respect. Certainly, when the banks, which are 72% owned by the taxpayer, decide to vacate these prime sites, it leaves a big hole at the heart of these shopping centres and communities.

--- Later in debate ---
James Cartlidge Portrait James Cartlidge
- Hansard - - - Excerpts

I never talked about fecklessness or being immoral. I was talking about the economic fact that the savings ratio was dangerously low throughout much of the Labour Government’s time in office, and they were warned about it. Labour Members are saying that we never said anything, and that simply is not true.

The hon. Lady seems to think that Labour had good policies on debt. I remember when someone could get a self-certified mortgage, with no proof of income, on an annual percentage rate relating to bad credit, so they could have a history of failing to pay debt. Not only that, but it was interest-only, so they were not even repaying the capital. There was a whole menu of different types of sub-prime such as light-adverse, medium-adverse or heavy-adverse. As I have said before, basically the question was, “Do you have a pulse?”, and then one got a mortgage.

Peter Dowd Portrait Peter Dowd
- Hansard - -

Will the hon. Gentleman simply acknowledge that in August 2007 the Conservatives had a policy of significantly more deregulation, including of the banks, and that was ratified by the Tory shadow Cabinet at the time?

James Cartlidge Portrait James Cartlidge
- Hansard - - - Excerpts

I do not accept that. Those mortgages were being advanced. The FSA knew about them and the Government knew about them. The fact is that when you are in charge of the financial system, you have a responsibility to act in a prudent manner. The Governor of the Bank of England always says, “Your duty is to take the punchbowl away when the party gets started.” The problem was that when the party got started under the new Labour Government in terms of debt and borrowing too much, they did not take the punchbowl away—they came out with a new round of tequila slammers, and when that was not enough, they brought out the Jägerbombs, until in 2008 we had the biggest hangover in our history, with the crashing of our economy on the back of the most reckless oversight of financial regulation that this country has ever seen.

--- Later in debate ---
James Cartlidge Portrait James Cartlidge
- Hansard - - - Excerpts

I did say that I would come to the current position on credit. I want to finish on the analysis of the three tenets in new clause 22 under which Labour says that we should consider how the bank levy has worked. According to subsection (2)(c), we should look at it in terms of

“encouraging banks to move away from riskier funding models.”

It is quite amusing to see a Labour new clause that contains the phrase

“encouraging banks to move away”.

My colleagues will appreciate that the whole point of reforming the bank levy is not to encourage banks to move away, but to encourage them to stay here and create wealth and jobs. Let us not forget that in all the figures we have heard about, we have not heard the key one. Banks contribute £116 billion of value added to our economy, not including any of the tax take.

Peter Dowd Portrait Peter Dowd
- Hansard - -

We have talked about the rewriting of history. The Shadow Cabinet at the time—we are talking about what happened at the time—said:

“We need to make it more difficult for ministers to regulate, and we need to give the critics of regulation more opportunity to make their case against specific new proposals.”

The Conservatives’ direction of travel at that time was towards not more regulation, but less. Does the hon. Gentleman acknowledge that at all?

James Cartlidge Portrait James Cartlidge
- Hansard - - - Excerpts

All the financial plans of that shadow Government would have been about fiscal prudence, and the context would have been completely different. The Labour Government crashed the economy on every single front, which is why we are where we are today.

There is one final point I want to make. We had a wide-ranging discussion earlier about Marxism, which I thought particularly intriguing. We have to decide, as a country, whether we want to be a flourishing free enterprise economy or a centrally commanded one in which everything remains in, or is taken into, the public sector. When the banks were nationalised, they were bailed out on the basis of rescuing the economy from an extreme threat that could have left us resorting to barter. The point is that we have put the banks on a stable footing so that they can flourish again and become competitive businesses. The bank levy, to me, is about striking a balance but having a competitive financial services sector to drive our exports and growth, and that is why I will be voting to support it.

--- Later in debate ---
Robert Courts Portrait Robert Courts
- Hansard - - - Excerpts

It is a great honour to speak in the debate on this very important matter, and particularly to follow the hon. Member for Bristol South (Karin Smyth). She made some very interesting points, and I am glad that she supports many of the technical education measures that the Government are bringing in. I entirely agree with her that this is one of the great challenges the country faces, and I applaud the Government’s work in setting out a framework for technical education in the future.

I want to talk directly about the bank levy. All hon. Members on both sides of the House probably accept that it is very important for the banks to pay a fair contribution towards public services and the tax yield in this country. They are significant employers with significant operations and they are wealthy and profitable enterprises, but it is very important to have a balance. Such a balance throws into relief the fact that banks are responsible not just for being profitable and therefore for paying tax, but for introducing liquidity into the system and enabling us to borrow.

If any hon. Member has ever borrowed to buy a car or a house or to invest in a business—many of their constituents will of course have done so—the money will have come from a bank in most cases. It is very important that banks are enabled to provide precisely that service, so there has to be a balance. Yes, they must pay a fair share towards the economy and society in which we all live, but that share should not be so large that their ability to lend is decreased. I suggest that this Government have got the balance right. In 2010, the Conservative coalition Government increased regulation, and in 2011 they introduced the bank levy, which reflected the risk inherent in the banking sector. It is an inherently risky sector because of the very nature of the way in which it operates, and the bank levy was introduced precisely to recognise that risk. It was introduced to incentivise the banking sector as it then was to invest in a way that was less risky than the ways in which it had operated up until that time.

That spirit of balance, which is the keynote point of my few remarks this evening, is why we need reform now. There is a gradual shift from the levy to taxing profit, recognising that the regulatory regime globally, as well as in this country, has moved on considerably since it was introduced. Since 2016, we have had an 8% tax on bank profits—the corporation tax surcharge—which will raise £9 billion between 2017 and 2022. The bank levy rate will be reduced to 0.1% over the same period. Of course, there is the additional fairness brought by ensuring that the levy affects only UK balance sheets. UK-based banks must never be disincentivised from being based here, rather than being based abroad and operating here. We can make those changes now because of the improvements in global regulation.

Members from all parts of the House should recognise that it is important that we, as politicians, do not become too fixated on the rate of taxation, but rather look at the revenue that is earned. I suggest that this Government have got that balance—that key focus—correct. That is the economic paradox of taxation rates. We heard about the Laffer curve from my hon. Friend the Member for Stirling (Stephen Kerr). If there is 0% tax, 0% taxation is received. If there is 100% tax, 0% taxation is received. The point is where precisely the balance is struck. I suggest that the Government have got it correct.

The measures that we have brought in since 2015 have introduced an additional £7 billion through to 2023, bringing in a total of £30 billion over and above what would have been brought in through corporation tax in any event.

Peter Dowd Portrait Peter Dowd
- Hansard - -

I am not quite sure that the hon. Gentleman is correct about that, because the Institute for Fiscal Studies states:

“Cuts to corporation tax rates announced between 2010 and 2016 are estimated to reduce revenues by at least £16.5 billion a year in the short to medium run.”

Even the Treasury’s own figures show that the cost has been significant.

Robert Courts Portrait Robert Courts
- Hansard - - - Excerpts

I simply do not accept that point, with the greatest of respect to the hon. Gentleman. It is quite clear that the reduction in corporation tax, which I am glad he has mentioned, has led to an increase in revenues over that period. It is accepted that GDP is expected to increase by 1.3% in the long run. The receipts have increased by 50% since the Government have been reducing the corporation tax rate, from £36 billion to £55 billion between 2010 and 2016. That is an increase to £55 billion going to the Exchequer over that period.

--- Later in debate ---
Robert Courts Portrait Robert Courts
- Hansard - - - Excerpts

It is exactly the same principle with personal taxation. My hon. Friend makes an absolutely outstanding point. He is quite right and we must not forget that the principle is the same for personal taxation as it is for corporation taxation. Not only is the tax yield increasing, it is also borne by those who earn the most. It is indeed progressive and, I would hope, something all Members could support.

I know other Members wish to speak, so I will conclude with this point. An Opposition Member suggested that no one on the Government Benches has spoken about wages, public services and so on. I would very much like to concentrate on them in these last few seconds of my speech. It is through our tax regime, the sensible taxation policies that this Government have put in place since 2010, that we are now able to see an increase in—

Peter Dowd Portrait Peter Dowd
- Hansard - -

Given those sensible taxation levels and rates, will the hon. Gentleman explain why productivity is the lowest of all our competitors, inflation is higher than our competitors, wage stagnation is almost becoming endemic, investment is slower, and economic growth is on the floor? If having these so-called lower rates of tax is such a fantastic opportunity for businesses, how come we are still in this particular situation?

Robert Courts Portrait Robert Courts
- Hansard - - - Excerpts

I am grateful, as ever, to the hon. Gentleman for making his points. He makes a number of them and it will not surprise him that I do not agree with him. We have record investment, an extraordinary economic miracle and a jobs miracle. We are still having to recover from the economic mess the Labour party left us in. There is absolutely no two ways about it: the Labour party left us with record levels of national debt.

Our economy is seeing an increasingly benign environment. That has been made possible by the sensible taxation measures the Government have allowed to take place and have sponsored. It is through that tax regime that there is more to spend on public services: companies can look to increase wages, hire more staff, pay more tax and thereby fund the public services we all need.

Finance (No. 2) Bill (Fourth sitting) Debate

Full Debate: Read Full Debate
Department: HM Treasury

Finance (No. 2) Bill (Fourth sitting)

Peter Dowd Excerpts
Committee Debate: 4th sitting: House of Commons
Thursday 11th January 2018

(6 years, 2 months ago)

Public Bill Committees
Read Full debate Finance Act 2018 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 11 January 2018 - (11 Jan 2018)
Freezing of indexation allowance for gains chargeable to corporation tax
Peter Dowd Portrait Peter Dowd (Bootle) (Lab)
- Hansard - -

I beg to move amendment 48, in clause 26, page 18, line 35, at end insert—

‘(7A) Within 12 months of the passing of this Act, the Chancellor of the Exchequer must review the impact of the provisions of this section.

(7B) A review under subsection (7A) must consider the revenue effects of freezing indexation allowance for gains chargeable to corporation tax.

(7C) The Chancellor of the Exchequer must lay before the House of Commons the report of the review under subsection (7A) as soon as practicable after its completion.”

This amendment provides for a review to be undertaken on the revenue effects of freezing indexation allowance for gains chargeable to corporation tax in Clause 26 of the Bill.

None Portrait The Chair
- Hansard -

With this it will be convenient to discuss clause stand part.

Peter Dowd Portrait Peter Dowd
- Hansard - -

The measures in clause 26 are aimed at aligning and consolidating tax and accounts. This clause will freeze the indexation allowance currently in place for companies’ gains that are chargeable to corporation tax. As things stand, companies do not have to pay tax on the proportion of their capital gains attributable to inflation. Instead, as hon. Members know, what happens is that when calculating a gain on the disposal of an asset, companies apply an indexation factor on the acquisition, enhancement or disposal of the asset that reflects movements in the retail prices index over the period since the expenditure occurred.

This system is different from the treatment of individual taxpayers, for whom the allowance was first frozen in March 1998 and then abolished in April 2008. That prompts the question: why was the allowance for companies not reformed and abolished at the same time, to avoid the situation that we have had for the past nine years, whereby there has been one set of rules for individual taxpayers and another for companies? However, we are where we are. It is another example of a needless complication in the tax system that causes problems for lawmakers, tax accountants, financial advisers, Her Majesty’s Revenue and Customs and taxpayers alike.

The indexation allowance is in effect a tax relief from capital gains tax on inflation. The allowance may have been minimal before the drop in the pound, but with inflation at 2.8%, 3% and so on, it is potentially becoming a substantial amount of money. According to the Treasury’s estimates, the change could be a significant revenue raiser. It estimates that it will raise £30 million this year alone, and that that will go up to £525 million for 2022-23. Of course, that revenue would be a welcome addition to the public coffers, but we have a degree of scepticism about the figures, because in the past we have had from the Government figures and costings for measures that have been out of kilter quite heavily.

The most recent example was the revenue to be raised from the soft drinks industry levy, which was introduced in the first Finance Bill last year. Hon. Members may recall that that was dealt with in the wash-up. Opposition Members agreed to it going through its stages pretty smoothly. We always have concerns when there is a question about whether we can sufficiently challenge Government proposals, but as this was the sugar tax, and it was not just a tax-raising measure but had broader public health benefits, we were happy to allow it to go through. It was suggested in the draft proposals that the levy would raise an ambitious £520 million. However, the Chancellor announced in the 2017 spring Budget that its estimated revenue had been revised down to £380 million, and the Office for Budget Responsibility forecast in December, on the basis of the Government’s Red Book for the autumn Budget, that it would raise only £300 million. That is a whopping £220 million less than the Government’s original forecast, and a further £80 million less than the revised figure that the Chancellor provided in the spring Budget.

It is important for us to be clear. If the Government provide us with figures—I believe that they did so in good faith—we have a duty to challenge them. That miscalculation—I use that word rather than any other—only adds to the growing hole in the public finances. It is important for us to challenge the Government’s figures and assumptions.

That is why the Opposition tabled amendment 48, which would require the Government to commission a review of the revenue effects of freezing the indexation allowance for gains chargeable to corporation tax. I am sure that the Minister is sympathetic to our concern that some companies may still seek a way round the change, rather than paying an increasing amount on the inflationary element of gains. The amendment is an attempt by the Opposition to say, “Fine, the Government’s indexation proposal is okay—but let’s test the figures a little more.” Let us have a review. Let us ensure that we are not in the same situation as we were with the soft drinks levy, which does not raise as much revenue as we thought it might.

Alison Thewliss Portrait Alison Thewliss (Glasgow Central) (SNP)
- Hansard - - - Excerpts

The Minister will be aware that the insurance industry has raised concerns about the impact of the clause on fairly small savers, such as people with endowments that were sold door to door. There is a report on the BBC website that quotes Steve Webb, a former Minister who now works with Royal London, on the impact that the clause will have on Royal London’s savers. Standard Life is also reported to have concerns. We are therefore not entirely content with the clause. We will not oppose it at this stage, but we reserve the right to look at it again on Report.

We would like the Government to address the industry’s concerns, and I have a few questions for the Minister. It is estimated that the clause will affect 11.6 million policyholders, most of whom are basic rate taxpayers, and the industry estimates that the impact will be in excess of £250 million per year—double the figure implied by the Chancellor at the Treasury Committee in December. Individual life insurance policyholders may pay an average of £21, and in some cases up to £150, per policy per annum. That is a considerable impact given that such people have relatively small savings.

The Chancellor said in December in response to my hon. Friend the Member for Dundee East (Stewart Hosie), who sits on the Treasury Committee, that the change will have a “modest impact”, but that is not a modest impact for those savers—it is significant. The policies that the clause will affect include non-pension unit-linked, non-pension with-profits and whole-of-life policies, as well as endowments, which I mentioned. On what basis did the Government reach the conclusion that the change will have a modest impact and affect a relatively small number of policyholders? We are talking about 11.6 million people—not a small number by any manner or means. Those policies may represent a relatively small amount of money to the Government, but the change will have a significant impact for those people.

Have the Government made an assessment of the number of policies affected? Have they produced a detailed impact assessment that can be shared with members of the Committee? Will the Minister commit to providing further information on the impact of the policy on individual savers? The coverage in newspapers at the time of the Budget and since raises concerns that more policyholders will be affected than the Government at first assumed.

I would like as much clarification as the Minister can give us today. If he could write to me later with more detailed information, that would also be welcome. We want to put on record our concerns about the impact there might be; perhaps there will be unintended consequence, and maybe the impact has not been fully considered. Given the concerns that the industry is raising, it would be good get a commitment from the Government on how those will be addressed.

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Peter Dowd Portrait Peter Dowd
- Hansard - -

I hear what the Minister says. I am sure that he will appreciate that the figures produced by the OBR are different from those produced by the Chancellor of the Exchequer. None the less, in the spirit of co-operation, I am happy to withdraw the amendment and keep tabs on this. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 26 ordered to stand part of the Bill.

Clause 27

Assets transfer to non-resident company: reorganisations of share capital etc

Question proposed, That the clause stand part of the Bill.

None Portrait The Chair
- Hansard -

With this it will be convenient to discuss new clause 11—Review of financial impact of postponement of charge on share exchange in overseas transferee company

‘(1) Within twelve months after the passing of this Act, the Chancellor of the Exchequer must review the financial impact of the changes made by section 27 of this Act to section 140 TCGA.

(2) The review under this section must consider—

(a) the revenue effects of the change made, and

(b) the extent to which the change has supported UK companies to conduct international business.

(3) The Chancellor of the Exchequer must lay before the House of Commons the report of the review under this section as soon as practicable after its completion.”

This new clause provides for a review of the revenue impact and the impact on business of the change to TCGA to prevent a postponed chargeable gain from becoming chargeable following further restructuring of a UK Company’s overseas business.

Mel Stride Portrait Mel Stride
- Hansard - - - Excerpts

Clause 27 will ensure that where a series of changes have been made to the corporate structure of a group, the rules for taxing the capital gain at the final stage of the change work as the Government intend.

The situation that the clause addresses is where a group reconstruction involves a part of the business that has previously converted from a branch operation into one carried on by a separate overseas company. That is done through an exchange of the foreign branch business and assets for shares in the overseas company. If the assets have increased in value, the group may be liable for tax on the capital gain. The tax system allows it to defer paying that until either the assets of the business or the shares in the overseas company are sold or otherwise disposed of outside the group. That is a sensible approach. It means that groups pay tax on the full level of gains when they realise them through selling an asset and generate a profit to pay the tax with, but they are not charged on a purely internal restructuring.

The introduction of the substantial shareholding exemption in 2002 affected those rules in a way that was not intended, meaning that the tax on the earlier capital gain may become payable if there is a later restructuring, even if that does not involve a sale outside the group. The need to undertake such reconstructions has been rare since 2002, so the anomalous tax outcome was not identified as problematic until recently. However, it is now a cause for concern to some businesses, mainly due to changes in regulatory requirements of some overseas tax jurisdictions. The clause corrects that anomaly.

The change made by the clause will affect groups that commonly operate overseas through branches. It will be welcomed by them, as it will give them certainty in arriving at their commercial decisions when considering restructuring. It is a wholly relieving measure with negligible fiscal impact, as the groups that were affected by the problem would either have found other ways to deal with it or simply not have proceeded with the proposed transaction.

Opposition Members have requested a review of the revenue effects of this change and of the extent to which it has supported UK companies in conducting international business. I am happy to provide them with further information on those points. The OBR has agreed that there will be no revenue effects, because if the changes were not made, the companies concerned would either not undertake the reorganisation or would reconstruct in a way that did not create a tax charge. In either case, they would have to suffer a less than ideal commercial structure because of an anomaly in the tax rules.

This change will help a small number of businesses. On its own, it will not make a big difference, but it will contribute to our wider approach of encouraging UK businesses to conduct international business. The purpose of the change is to remove an anomaly at no cost to the Exchequer. On that basis, I hope that the hon. Member for Bootle will not press the new clause to a vote, and I commend clause 27 to the Committee.

Peter Dowd Portrait Peter Dowd
- Hansard - -

Clause 27 amends the Taxation of Chargeable Gains Act 1992 to ensure that tax postponed does not become due on the occasion of a subsequent corporate restructuring involving the exchange of shares in an overseas transferee company where the substantial shareholding exemption applies to the share exchange. The Government’s explanation for this change is that the measure removes an unintended tax barrier to commercial restructuring of groups. I will not go into the ins and outs of this, which the helpful explanatory notes set out.

The argument for this change is that currently, companies that use the substantial shareholding exemption can treat the gain or loss on a disposal of shares as exempt from corporation tax on chargeable gains. A by-product of that is that a chargeable gain could be chargeable on a further restructuring of the company, with the old shares of the securities treated as new ones, despite the same corporate group continuing to own them. The new clause seeks to track that unintended change.

Clearly, the Government’s case is that the unintended tax change creates barriers, particularly for financial sector businesses that have traditionally operated through a network of foreign branches and need to restructure, for example to meet changing regulatory requirements in the territories where they conduct their business. That seems perfectly reasonable, but will the Minister give us a few examples, now or in due course?

While we accept the Government’s argument about the unintended consequence of correcting the tax change, we do not necessarily accept the costings put out by the Treasury, which argues that the change would in effect have zero impact on its finances. In our view, there is a lack of information from the Treasury and the OBR about the revenue that the unintended tax change has raised. I press the Minister to, if possible, publish those figures.

That is why we have put forward new clause 11, which would require the Minister to report back to Parliament on the revenue implications, on the impact on the Exchequer and on the restructuring of UK companies’ overseas business. If the Opposition are to accept the Government’s case that the current measures are a barrier to restructuring, leading to lost revenue for UK companies and lost investment in the UK, it is only reasonable that the Minister should produce evidence to that effect.

We are also interested to know whether there are any losses of revenue to the Exchequer. The Minister says they are “negligible”. It is not that I do not accept that; I am just trying to be clear about this. The Minister should explain, if there is a loss of revenue, how that loss will be filled, how much it is, whether he will be clear in keeping tabs on the process—for example, through the review we want—and how the measure will be implemented.

Mel Stride Portrait Mel Stride
- Hansard - - - Excerpts

The first point to make is that the measure will affect an extremely small number of businesses. We are talking a multiple of handfuls. That is one of the drivers for the negligibility of the costs. I am pleased that the hon. Gentleman appears broadly to welcome the thrust of what we are doing. On the issue of cost that he raises, the figures have been verified by the Office for Budget Responsibility, so an independent organisation has had a look at them, and we are not relying on the Treasury. By “negligible”, I mean that we are looking at an impact of less than £5 million in any one year across the scorecard period.

The figures would be relatively negligible not just because of the small number of businesses involved, but because, in the absence of the changes, we would expect those companies either not to restructure in the way we are now facilitating, or to find different ways of approximating the same thing without incurring the tax disadvantages that we seek to remove through this clause.

Question put and agreed to.

Clause 27 accordingly ordered to stand part of the Bill.

Clause 28 ordered to stand part of the Bill.

Clause 29

First-year tax credits

Question proposed, That the clause stand part of the Bill.

Finance (No. 2) Bill Debate

Full Debate: Read Full Debate
Department: HM Treasury

Finance (No. 2) Bill

Peter Dowd Excerpts
3rd reading: House of Commons & Report stage: House of Commons
Wednesday 21st February 2018

(6 years, 1 month ago)

Commons Chamber
Read Full debate Finance Act 2018 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Consideration of Bill Amendments as at 21 February 2018 - (21 Feb 2018)
Peter Dowd Portrait Peter Dowd (Bootle) (Lab)
- Hansard - -

I beg to move, That the clause be read a Second time.

Rosie Winterton Portrait Madam Deputy Speaker (Dame Rosie Winterton)
- Hansard - - - Excerpts

With this it will be convenient to discuss the following:

New clause 4—Public register of entities paying the bank levy and payments made

“(1) Schedule 19 to FA 2011 (bank levy) is amended as follows.

(2) After paragraph 81, insert—

“Part 11

Public register of payments

83 (1) It shall be the duty of the Commissioners for Her Majesty’s Revenue and Customs to maintain a public register of groups paying the bank levy and the amounts paid.

(2) In relation to each group, the register shall state whether it is—

(a) a UK banking group,

(b) a building society group,

(c) a foreign banking group, or

(d) a relevant non-banking group.

(3) In relation to each group, the register shall state the amount paid in respect of each chargeable period.

(4) In relation to chargeable periods ending between 28 February 2011 and 31 December 2017, the Commissioners must make public the register no later than 31 October 2018.

(5) In respect of subsequent chargeable periods, the Commissioners must make public the updated register no later than ten months after the end of the chargeable period.””

This new clause requires HMRC to prepare a public register of banks paying the bank levy and the amount they have paid.

New clause 5—Bank levy: Part 1 of Schedule 9: pre-commencement requirements

“(1) Part 1 of Schedule 9 shall come into force in accordance with the provisions of this section.

(2) No later than 31 October 2020, the Chancellor of the Exchequer shall lay before the House of Commons an account of the effects of the proposed changes in Part 1 of Schedule 9—

(a) on the public revenue,

(b) in reflecting risks to the financial system and the wider UK economy arising from the banking sector, and

(c) in encouraging banks to move away from riskier funding models.

(3) Part 1 of Schedule 9 shall have effect in relation to chargeable periods ending on or after 1 January 2021 if, no earlier than 30 November 2020, the House of Commons comes to a resolution to that effect.”

This new clause requires the Government to provide a separate analysis of the impact of Part 1 of Schedule 9 nearer to the time of proposed implementation in 2021 and to seek the separate agreement of the House of Commons to commencement in the light of that review.

Amendment 1, in schedule 9, page 134, line 2, at end insert—

“34A After paragraph 81 insert—

“Part 10

Review of entities on which the bank levy is charged

82 (1) Within six months of the passing of the Finance Act 2018, the Chancellor of the Exchequer shall undertake a review of the provisions in this Schedule defining which groups are covered by the bank levy.

(2) The review shall consider in particular—

(i) the adequacy of those provisions in applying the bank levy to groups that are—

(a) not a group in paragraph 4(2) and

(b) derive their income from investments in the manner of a group in paragraph 4(2),

(ii) the adequacy of the groups in paragraph 4(2) in charging the bank levy to lending and investment entities,

(iii) the degree to which the groups in paragraph 4(2) reflect lending and investment entities that have entered into contracts with public sector bodies,

(iv) the adequacy of the definition of “investment group” in paragraph 12(9) in reflecting lending and investment entities that have entered into contracts with public sector bodies, and

(v) the revenue effects of changes to include lending and investment entities that have entered into contracts with public sector bodies within groups covered by the levy.

(3) The Chancellor of the Exchequer shall lay a report of the review under this paragraph before the House of Commons as soon as practicable after its completion.””

This amendment requires a review about the appropriate extent of the bank levy in terms of the lending and investment entities which it covers, considering the extent to which it covers PFI finance groups and assessing the revenue effects of such an extension.

Amendment 5, page 134, line 6, leave out from “in” to end of line 7 and insert

“accordance with the provisions of section (bank levy: Part 1 of Schedule 9: pre-commencement requirements)”.

This amendment is consequential on NC5.

Amendment 2, page 134, line 10, at end insert—

“37 The amendments made by paragraph 34A have effect from the day on this Act is passed.”

This amendment is consequential on Amendment 1.

New clause 6—Analysis of effectiveness of provisions of this Act on tax avoidance and evasion

“(1) The Chancellor of the Exchequer must review the effectiveness of the provisions of this Act in accordance with this section and lay a report of that review before the House of Commons within six months of the passing of this Act.

(2) A review under this section must consider—

(a) the effects of the provisions in reducing levels of artificial tax avoidance,

(b) the effects of the provisions in combating tax evasion, and

(c) estimates of the role of the provisions of this Act in reducing the tax gap in each tax year from 2018 to 2022.”

This new clause requires the Chancellor of the Exchequer to carry out and publish a review of the effectiveness of the provisions of the Bill in tackling artificial tax avoidance and tax evasion, and in reducing the tax gap.

Amendment 3, in schedule 8,  page 103, line 41, at end insert—

“21A After section 461 (counter-acting effect of avoidance arrangements) insert—

“Chapter 11

Review

461A Review

(1) Within six months of the passing of the Finance Act 2018, the Chancellor of the Exchequer shall undertake a review of the effects of amending the operation of this Part in relation to the excess profits of PFI companies.

(2) For the purposes of the review under this section, it shall be assumed that the operation of this Part would be amended so as to—

(a) deduct the uncompensated excess profit amount of PFI companies from the aggregate of the interest allowances of the group for periods before the current period so far as they are available in the current period for the purposes of calculating the interest capacity of a worldwide group under section 392 (the interest capacity of a worldwide group for a period of account),

(b) provide that, for groups that contain a PFI company, the uncompensated excess profit amount for a period is equal to the group excess profit amount less the aggregate amount by which the group’s taxable profit has been reduced in prior periods as a result of such provisions,

(c) provide that the group excess profit amount for any period will be the aggregate PFI excess profit amount for each PFI company in the group, and

(d) provide that the PFI excess profit amount for a PFI company for a period will be the amount by which the internal rate of return on shares and related party debt in that company (from inception to the end of the previous accounting period) exceeds the internal rate of return set in the relevant PFI contract or, if no such return was specified, 10%.

(3) For the purposes of this section, “a PFI company” means a company which has entered into a contract with a public sector body under the Private Finance Initiative or the PF2 initiative.

(4) The Chancellor of the Exchequer shall lay a report of the review under this section before the House of Commons as soon as practicable after its completion.”

This amendment requires a review about the effects of making provision to discount the excess profits of a PFI company for the purpose of calculating the aggregate of the interest allowance of worldwide groups in the provisions of Part 10 of the Taxation (International and Other Provisions) Act 2010.

Amendment 4, page 105, line 17, at end insert—

“26A The amendments made by paragraph 21A have effect from the day on this Act is passed.”

This amendment is consequential on Amendment 3.

Peter Dowd Portrait Peter Dowd
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Let me start by reiterating the sentiments that I expressed in Committee when we were debating the bank levy. I said then that it served no one to

“homogenise the people who work in the banking sector as either saints or demons.”—[Official Report, 18 December 2017; Vol. 633, c. 814.]

Such a simplification ignores the complexity of our financial services, the individuals who work in them, and the institutional culture that informs the practices within them. About 2,000 people work in the banking sector in my constituency, particularly in Santander, and many of them are my committed constituents.

Similarly, we cannot ignore the important role that banks play in the smooth functioning of our economy. We should avoid a “one size fits all” approach that lumps all banks together for the purpose of a bank-bashing session. The House should have a grown-up, mature discussion about issues such as the bank levy, the indisputable reasons for its introduction, its effectiveness, and why the Government are now desperate to cut it further. First, however—if I can be indulged slightly—I will say a few words about the political context of today’s debate.

Since we last debated the Government’s proposed changes in the bank levy, there have been several developments. This has continued the long saga of what is now recognised as a divided and directionless Government, and it goes to the heart of the whole question of the Government’s finances. We have seen the resignation of the Prime Minister’s deputy, and a botched Cabinet reshuffle in which the Secretary of State for Health refused to budge, another Secretary of State returned to the Back Benches rather than moving to the Department for Work and Pensions, and the Conservative party headquarters wrongly announced that the Secretary of State for Transport would become the party’s chairman. That goes to the heart of the question of the Government’s competence, which also relates to the bank levy.

During the recent Black and White fundraising dinner, at which the bank levy and our review of it were no doubt discussed, and which was held at the Natural History Museum—evidently live dinosaurs were visiting dead dinosaurs—the Prime Minister, addressing the Jurassic attendees, said:

“we are on a renewed mission to fight and win the battle of ideas and to defeat socialism today”.

How did the Government plan to defeat socialism in our modern age—the age of the fourth industrial revolution and the internet of things? The answer was that they held a raffle. While no doubt discussing the bank levy and issues relating to it, they raffled, at £100 a ticket, an eight-gun, 500-pheasant and partridge shoot donated by a millionaire hedge fund supporter who must know a great deal about the bank levy. That is how the Government will defeat socialism: by slaughtering 500 partridges and pheasants.

To keep Tory MPs’ spirits up, the Chief Whip recently sent them all a letter telling them that their performance in Parliament had been “excellent”, and that

“Remaining united in Parliament is a vital part of ensuring that Jeremy Corbyn remains in opposition”—

I am not sure whether he was trying to convince his colleagues or himself. And so it goes on. It is little wonder that the Secretary of State for Exiting the European Union has suggested that Ministers would have to be locked in a room for any agreement to be reached—that is, if they could all find the same room. I would agree with that suggestion, on the condition that we could throw away the key. Meanwhile, the Treasury has been briefing the press that the spring statement will be scaled back to include no Red Box, no official document, no spending increases and no tax changes—and perhaps no embarrassing U-turns either—as well as, no doubt, an inability, yet again, to talk about the bank levy, what we could do with it, and how we could make progress with it.

Rather than the Government outlining a long-term economic plan, we have yet another Finance Bill engineered for the benefit of the few. There is little in the Bill to tackle our dreadful productivity performance, stuttering growth, high inflation and lack of investment in our infrastructure and people, but if we raised more from the banking levy, we could do something about that. In that context, the Government have come up with the bright idea of offering another tax break to the banks by further limiting the scope of the bank levy. That would ensure that, from 2020, banks will pay the levy only on their UK balance sheets, not their overseas activities.

Our position on the bank levy has been clear: we have consistently argued for a more proportionate levy and pointed out that the levy, which would introduced in 2011, would raise substantially less than Labour’s bankers’ bonus tax. In short, we have always stood against the Government’s divisive austerity fetish.

Chris Philp Portrait Chris Philp (Croydon South) (Con)
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I must gently point out that the Labour party’s position on the bank levy has been anything but clear. Labour Members opposed the levy when it was first introduced. They then called for it to be retained, and their amendments today propose neither retaining nor abolishing it. As the hon. Gentleman’s party’s position is entirely unclear, perhaps he could take this opportunity to clarify it.

Peter Dowd Portrait Peter Dowd
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We opposed the levy because it was a reduction in the taxes that the banks were paying. I know the hon. Gentleman wants to be generous to people who already have money and very ungenerous to those who do not have money, but he should give considerable thought to that before he makes such interventions, because it does not do his party’s reputation any good, as that sort of approach is mean and miserly.

That was why we voted against the levy during our consideration of the 2011 Finance Bill, which introduced the bank levy along with cuts to corporation tax and tax giveaways for the most well-off—that is the context. It was also why we expressed concern in 2015 about the Government’s cuts to the bank levy and the introduction of the corporation tax surcharge, and it is why we will vote against this measure today. We will support my hon. Friend the Member for Walthamstow (Stella Creasy), who will—I suspect forlornly—call for a review of the effects of making provisions to discount excess profits of a private finance initiative company for the purpose of calculating the aggregate of the interest allowance of worldwide groups under the provisions in part 10 of the Taxation (International and other Provisions) Act 2010. We support that as a step in the right direction to tackle the whole construct and operation of PFI schemes, which was a policy announced last September by my right hon. Friend the Member for Hayes and Harlington (John McDonnell), the shadow Chancellor.

The bank levy was not the brainchild of a Conservative Government. It was not introduced because the previous Chancellor had been suddenly moved by public outrage about reckless decisions made by some in the banking sector who plunged us into the world’s greatest economic crisis in modern times. That is the context for this issue. The levy was not designed to ensure that banks received enormous and unprecedented bailouts from the taxpayer, such as when the Government purchased £76 billion of shares in RBS and Lloyds. It was instead designed to make banks pay their fair share, and I refer Members to the comments about schedule 9 on pages 83 to 93 of the explanatory notes, where that is laid out clearly and unambiguously.

In fact, the very concept of a bank levy was developed at the G20 summit in Pittsburgh in 2009. It was championed by the previous Labour Government, who subsequently introduced the bankers’ bonus tax. In the austerity Budget of 2011, the coalition Government decided to dump the bankers’ bonus tax and to adopt the bank levy. At that time, Labour made it clear that the levy threshold was far too low when compared with the money that would have been raised if the Government had stuck with Labour’s bonus tax. Ministers folded under pressure from the banks and set the levy at a lower rate of £2.6 billion.

The threshold was established—here we come to the issue of experts and taking expert advice—despite Treasury officials openly acknowledging it to be far too low. Under the original Treasury plans, the levy would have raised £3.9 billion a year, which is nearly £1.3 billion more than the £2.6 billion that has been indicated. But the then Government, lobbied by the privileged few, ensured that the threshold remained low. At 0.078% for short-term liabilities and 0.39% for long-term liabilities, the level that was set was—not to put too fine a point on it—a pretty tasteless joke compared with that of other countries that introduced a similar levy. It was less than a third of the level set in France, substantially smaller than the level in Hungary, which was set at 0.53%, and even lower than that of the United States of America. In 2015, under pressure from some of the Government’s friends in the finance sector, the then Chancellor cut the bank levy rate, and the current occupant of No. 11 has continued on that particular sojourn. In so doing, he has ensured that, by 2020, the UK’s biggest banks will have received a tax giveaway worth a whopping £4.7 billion. That £4.7 billion could been spent on our public services, and notably on children’s services, which have been cut to the bone.

Chris Philp Portrait Chris Philp
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The hon. Gentleman says that the banking sector has received a whacking tax cut. I will dispute that further in my later comments, but the figures are these: in 2009-10, the banking sector paid £17.3 billion in tax; last year, it paid £27.3 billion. That represents a 58% increase. So, far from having a tax giveaway, the banks are now paying more in taxes than they were six years ago by some margin.

Peter Dowd Portrait Peter Dowd
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That is not surprising: the banks returned to profitability because the taxpayer bankrolled them. That was how they got back into profitability, and they must pay their fair share of taxes as a result. The constituents of every Member of Parliament paid towards that, and when the profits came back in, the taxes went back up. We have helped the banks out, and they have to help our public services out.

The Government claimed that their introduction of the 8% corporation tax surcharge would offset the cuts to the bank levy. If we look at the autumn’s Budget Red Book and the forecasts from the Office for Budget Responsibility, however, we clearly see that the surcharge will not match the fall in the bank levy. According to forecasts, the surcharge is set to increase by £300 million a year, while the receipts that the Exchequer receives from the levy will fall by £1.7 billion a year. That leaves a £1.4 billion gap. That is a fact that is printed in the Government’s Red Book and, as John Adams opined, “facts are stubborn things”.

In 2018, we are still feeling the economic consequences of the actions of the banks. Every day, the Government tell us that there is no money for productive investment and that austerity must continue, yet they have conspired to undermine and limit any remuneration from the banks that caused this sorry state of affairs in the first place. Once again, the Opposition’s ability to amend this Bill has been hamstrung and blocked by the Government’s continued use of arcane parliamentary procedure.

Anna Soubry Portrait Anna Soubry (Broxtowe) (Con)
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The person who said that there was no money left was actually the occupant of the Treasury who left a note for the incoming Conservative-Liberal coalition Government in 2010. The reality is that of course there is money. We raise taxes and we spend them exceptionally wisely as a Conservative Government, particularly on infrastructure which, as the hon. Gentleman must surely agree, is now at record levels. It is just that we are still having to clear up the mess that was left by the last Labour Government.

Peter Dowd Portrait Peter Dowd
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The right hon. Lady can believe what she wants, but who will pay any attention to the Chief Secretary to the Treasury who took over from a Labour Chief Secretary to the Treasury, but was out of that job within two weeks because of issues around his parliamentary expenses? Does she expect us to pay any attention to that whatever? [Interruption.] That was what happened. David Laws—

Anna Soubry Portrait Anna Soubry
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Will the hon. Gentleman give way?

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Peter Dowd Portrait Peter Dowd
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I will not give way. I am going to move on—

Anna Soubry Portrait Anna Soubry
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There’s a surprise!

Peter Dowd Portrait Peter Dowd
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The right hon. Lady can come back later on. This is not a dialogue, as you would no doubt tell me, Madam Deputy Speaker.

We have a timid, feckless and self-obsessed Government who are frightened of their own shadow. They continue to give more money back to the banks, notwithstanding the fact that they keep telling us that the resources coming into the Government are insufficient to support our public services.

We are seeking three things by moving new clause 3. First, we want to require the Government to carry out a review of the bank levy, including of its effectiveness in relation to its stated aims. Secondly, we want to establish the extent of the effect of the 2015 cuts on revenues from the levy. Thirdly, we wish to calculate how much would have been raised if the Government had stuck with Labour’s bankers’ bonus tax. Such a report would put under the microscope for all to see the Government’s malpractice—that is what it amounts to—in cutting frontline services while offering tax giveaways to banks that can more than afford them. It would require the Minister to acknowledge that far more would have been raised under Labour’s bankroll tax and, just as importantly, that the Government’s current bank levy has done little to influence and mitigate the risky banking practices that remain in use in our financial services industry.

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Chris Philp Portrait Chris Philp
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I thank the hon. Gentleman for being generous with his time. He is trying to suggest that the Government have a bad track record on clamping down on avoidance and evasion. The key measure of that is the tax gap, which was 8% under the last Labour Government and has now fallen to 6%—that is the lowest in the world. Will he congratulate the Financial Secretary to the Treasury on that achievement and acknowledge that this Government are doing a better job in this area than the last Labour Government?

Peter Dowd Portrait Peter Dowd
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That does not take international profit shifting into account, as the hon. Gentleman knows. He should consider that.

The figures I have mentioned not only add to the growing hole in our public finances but demonstrate the Government’s complete lack of interest in taking on tax avoiders. I am glad the hon. Gentleman raised the last Labour Government’s record. So what was our record on tax avoidance? It might surprise Conservative Back Benchers to hear that Labour brought in anti-tax avoidance measures in the 1997, 1998, 1999, 2000, 2001, 2002, 2003, 2004, 2005, 2006, 2007, 2008, 2009 and 2010 Budgets. Most notably, in March 2004, the Labour Government introduced a disclosure scheme that required anyone marketing a tax mitigation scheme to give HMRC advance notice, giving the Revenue authorities an opportunity quickly to counter the scheme with new legislation. The Primarolo statement in December 2004 announced that the Government would introduce legislation, with retrospective effect, to counter any future scheme.

Labour’s tax transparency and enforcement programme has outlined 16 measures that the Government could take immediately to crack down on tax avoidance, including holding a public inquiry and publishing a public register of offshore trusts. In that fashion, new clause 6 would require the Government to commission a review of the effectiveness of the Bill’s anti-avoidance provisions and their impact on reducing the tax gap. I am proud of Labour’s measures on tax avoidance, and I am proud to stand here and say that.

Members should ponder this question: how can the Government possibly justify cuts in the banking levy while, on average, 30% of our children—it is even more in some constituencies—live in poverty? That question will not go away, however much the Government want it to.

Chris Philp Portrait Chris Philp
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As always, it is an enormous pleasure to follow the hon. Member for Bootle (Peter Dowd), whose speeches are always entertaining and occasionally informative. He spent a great deal of time talking about the bank levy and the various new clauses standing in his name on that topic. I wish to start by addressing the central thesis of his comments on the bank levy: his suggestion that banks are not paying their fair share, particularly as two of them received state money from about 2009.

It is a matter of incontrovertible fact that banks, as organisations, are paying more tax proportionately than other kinds of corporates. It is of course right that they do, for the reason that the hon. Gentleman and my right hon. Friend the Member for Broxtowe (Anna Soubry) mentioned: they did receive taxpayer money. They pay this extra money, compared with other businesses, in two ways. The first is through the surplus profit tax of 8%—they pay about a third more corporation tax proportionately than a non-bank corporation does. The second is through the bank levy. Although the bank levy is being reduced, it will remain in force, so banks will continue to pay proportionately more tax than non-bank businesses after the implementation of this Budget. That is a vital point to get across.

The hon. Gentleman also tried to link funding for children’s services to the bank levy. In one of my interventions, I gave some figures on the total amount of tax that banks are paying. We can argue about why they are paying that extra tax. Clearly, it is at least in part due to the surplus profits rate and to the bank levy. It may also, in part, be due to the fact that the banks’ profits have increased. Whatever the cause, the bare fact is that they are paying £7 billion or £8 billion a year more in tax now than they were some time ago. So suggesting that children’s services have been deprived of money as a consequence of changes to bank taxation simply does not bear scrutiny, given that the financial services sector is paying significantly more tax than it was before, whatever the cause of that may be.

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Chris Philp Portrait Chris Philp
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Let me take each of those points in turn. The hon. Gentleman asserts that, had the corporation tax rate remained at 28%, we would now be collecting more than £53 billion. That is an assertion, and not one with which one can agree without contention. For example, because of the lower corporation tax rate, plenty of businesses have made investments that they would not have made otherwise. Several companies had located their corporate headquarters outside the UK—

Peter Dowd Portrait Peter Dowd
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rose

Chris Philp Portrait Chris Philp
- Hansard - - - Excerpts

Just a moment; let me respond to these two points.

Those companies had located their corporate headquarters outside the UK and so paid corporation tax outside the UK, but in response to the Government’s cutting the rate of tax, they came back onshore and now pay corporation tax here. It does not follow at all that a higher corporation tax rate—28% in the case mentioned by the hon. Member for Stalybridge and Hyde (Jonathan Reynolds)—would lead to a higher tax yield. The direction of travel shows that, as the rate has come down, the amount collected has gone up. I just do not agree with the suggestion that, if the corporation tax rate were 28%, we would be collecting £60 billion or £70 billion.

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Chris Philp Portrait Chris Philp
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A number of points have been raised there. On the point about correlation and causation, of course I understand that they are not the same thing. However, in my remarks about corporation tax reductions, I did point to some of the causal links. The two causal links that I cited were, first, encouraging investment and, secondly, companies choosing to move their domicile—for example, from Switzerland back to the UK. Therefore, there are two causal explanations as to why a reduction in the rate of tax might lead to an increase in the tax yield.

Peter Dowd Portrait Peter Dowd
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The explanatory statement for new clause 3 says:

“This new clause requires the Government to carry out a review of the bank levy, including its effectiveness in relation to its stated aims, the revenue effects of the changes made in 2015 and the comparable effectiveness of the bank payroll tax.”

The stated aim, as set out in the Government’s own document, is as follows:

“Its purpose is to ensure that banks and building societies make a fair contribution, reflecting the risks they pose”.

We are asking for a review. If the hon. Gentleman is so sure of his facts and his case, why not have the review and see who is right in this debate?

Chris Philp Portrait Chris Philp
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The Government conduct analyses and reviews the whole time. I am not sure whether we need to put the review into primary legislation. As the hon. Gentleman refers to new clauses 3 and 4, which stand in his name, I will turn to them now.

The new clauses call for various reviews and registers. Of course, analysis is important. That analysis, I believe, takes place in the Treasury already—I am sure that the Financial Secretary will comment on that in due course. What is interesting about the new clauses tabled by the Opposition is not so much what is in them, as what is not in them—it is the dog that did not bark, if I can borrow from Sir Arthur Conan Doyle.

I mentioned in an intervention that the Labour party appears to have taken a number of different positions on the bank levy: it voted against it in 2011; it voted against the surplus tax in 2015; and then it stated in public that it wished to leave the bank levy in place, despite having voted against its introduction, which strikes me as rather confused. I was rather hoping that its new clauses and amendments might enlighten us on what its position actually is on the bank levy. This is primary legislation. This is a finance Bill soon to become, I hope, a finance Act. The Opposition had a chance here in this Chamber today to explain to the House and to the country how they think our tax system should work in relation to the bank levy. They could have tabled an amendment, had they chosen to, saying that they wanted to leave the bank levy in place as it was, or they could have tabled an amendment abolishing it altogether, yet they have done neither of those things; they have simply called for analysis. I am disappointed that their plans have not been elucidated.

Peter Dowd Portrait Peter Dowd
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rose

Chris Philp Portrait Chris Philp
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However, if I am about to be enlightened, I will of course give way.

Peter Dowd Portrait Peter Dowd
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The hon. Gentleman cannot have it both ways. The Government introduced an arcane procedure, which was first used, I think, by Winston Churchill in 1929, effectively to stop us moving any substantive amendments. Does he not recognise that, whatever we wanted to do, we would not have been able to change things anyway, because the Government were not permitting us to do so?

Chris Philp Portrait Chris Philp
- Hansard - - - Excerpts

I am not sure. This is a moment when my hon. Friend the Member for North East Somerset (Mr Rees-Mogg) is required to advise on such matters. I do not share his expertise in parliamentary procedure. However, the shadow Chief Secretary did not specify in his quite extensive—and, at times, amusing—remarks the official Opposition’s position on the bank levy. There is certainly no parliamentary procedure that prohibited him from doing so, so he could quite easily have chosen to specify his exact view—whether the bank levy should continue as it is, go or do something else—yet he did not do so. I am rather disappointed by the lack of clarity on that point.

The hon. Member for Stalybridge and Hyde said a few moments ago in one of his many interventions that HSBC might contemplate its jurisdiction in the light of Brexit. In fact, HSBC was debating where to domicile itself well before the referendum. If anyone or anything threatens the City of London’s status as a global financial centre, it is not the matters being debated today and it is not Brexit. In fact, it is the right hon. Member for Islington North (Jeremy Corbyn) and the comments he made a day or two ago, which, in the words of one commentator, threatened to turn London into a new version of Pyongyang. That is what he said. It was in the Evening Standard—a newspaper edited by a highly reputable journalist.

PwC has done some analysis of the tax contribution made by the financial services sector, finding that it paid £72.1 billion in taxes last year. That is about 9% of the UK’s total tax take. It is no laughing matter when misguided and populist politicians take a cheap shot at the City to get some headlines. If business is driven away, the implications will be very severe for our tax take and for employment. If we lose the tax revenue generated by the City, the people affected will of course be children and the NHS.

I ask the shadow Chief Secretary to convey gently to his dear leader that comments such as those made a day or two ago are very unhelpful to the City. They endanger jobs and jeopardise the £72 billion of tax that the City pays. Whether it is through fiscal measures or through words, it is a very serious matter when we endanger jobs and the tax revenue from the City that funds about two thirds of the NHS’s budget. In this Bill and in our words, we should protect that tax revenue and those jobs.

Peter Dowd Portrait Peter Dowd
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I am more than happy to convey the hon. Gentleman’s comments to the Leader of the Opposition, although I do not accept them. Will the hon. Gentleman also pass on my comments to the Prime Minister? She is making a mess of Brexit, which is far more dangerous to this country than the comments allegedly made by the Leader of the Opposition.

Chris Philp Portrait Chris Philp
- Hansard - - - Excerpts

There is no allegation; they were said publicly. I will of course convey the hon. Gentleman’s comments in a spirit of reciprocation, but I dispute the remarks about Brexit. We saw fantastic progress before Christmas and are moving on to the next stage. I look forward to the series of speeches by my Cabinet colleagues in the coming days and weeks that I appreciate are on a different topic to the one at hand.

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Rachel Maclean Portrait Rachel Maclean
- Hansard - - - Excerpts

It is a pleasure to follow the hon. Member for Aberdeen North (Kirsty Blackman) and the other contributors.

I will keep my remarks short as many of my points I wish to make have already been made by colleagues. I want to bust the myth that we on the Conservative Benches are friends of nefarious bankers and bad people trying to swindle money out of the honest taxpayer. Nothing could be further from the truth. We on these Benches want a healthy financial system underpinned by banks, and we want those banks to contribute fairly, as they can and must, and as they have been doing under this Government. The facts speak for themselves, as my hon. Friend the Member for Croydon South (Chris Philp) set out.

We have set out a plan to raise an additional £9 billion by 2022—a significant contribution to the Exchequer that will help to fund the public services on which people rely. The banks are making money out of businesses in this country. They need to make a return—they need to contribute fairly—and the Bill will ensure that that happens.

When Labour Members start to attack us and our policies, they need to look at themselves in the mirror. They need to bear in mind the number of times they voted against the introduction of corporation tax and bank levy measures which, as we have seen, have raised money from the banks. Theirs was the party that allowed the Mayfair loophole to develop, so that hedge fund managers were getting away with not paying tax while their cleaners were paying it. I remind the House that it was this Chancellor, in this Budget, who imposed a tax on private jets. Could any measure indicate more strongly that the Conservatives believe in fairness and taxing the proceeds of profit in the right way to fund our public services?

The hon. Member for Bootle (Peter Dowd) said that the banks were not making a fair contribution. I completely disagree with that narrative and that agenda. The banks are making a fair contribution.

Peter Dowd Portrait Peter Dowd
- Hansard - -

When I have made statements and I have been wrong, I do not mind people bringing that to my attention, but I did not say that the banks were not making a fair contribution. We were talking about a fairer contribution in the context of the Government’s own definition of what they should be doing. That is the point. The hon. Lady should have a look at the work. She should have a look at the book. She should do her research, and then make an accusation.

Rachel Maclean Portrait Rachel Maclean
- Hansard - - - Excerpts

I am not making an accusation at all. I apologise if I have misrepresented the hon. Gentleman. I merely wish to make the point that I believe that banks must make a fair contribution, and that the Bill will enable them to do so. Through measures that we have introduced since we have been in government, £160 billion has been raised for the Exchequer.

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Peter Dowd Portrait Peter Dowd
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Very little that I have heard from the other side in this debate has convinced me that we should withdraw our new clause—

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Turning to new clause 6 and the points raised about tax avoidance and evasion, I have little to add to what I have set out in our extensive debates on these issues at earlier stages of the Bill. A public review is not necessary. This Government have an extremely strong record on tackling tax avoidance, evasion and non-compliance, both domestically and internationally. Since 2010, HMRC has secured and protected £175 billion that would have gone unpaid. The UK is the only country to measure and publish a tax gap covering direct and indirect taxes every year. Our tax gap is, as other Members have pointed out, one of the lowest in the world, at 6%—that has come down from 7.9% under Labour in 2005-06. Despite our demonstrable successes, the Government cannot and will not be complacent. We will continue to keep the tax system under review at all times, and I urge the House to reject the new clauses and amendments.
Peter Dowd Portrait Peter Dowd
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That response from the Minister had complacency running through it like a line through a stick of rock. It contained self-congratulation and a rejection of any suggestion of a review, in any area. Not only have the Government not allowed us to make any significant changes, but they are not even prepared to listen to our asking for reviews, such as that requested by my hon. Friend the Member for Walthamstow (Stella Creasy). It is unacceptable if the Government are not prepared even to go that far, having shackled us this much. That is disgraceful. The Government, in this Parliament, should be ashamed of themselves for shackling the Opposition to this degree. We will push the new clause to a vote.

Question put, That the clause be read a Second time.

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Peter Dowd Portrait Peter Dowd
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The only thing I agree with the Minister about is that I too thank everyone who has taken part in the proceedings. The Bill is not up to the challenge. It contains nothing of substance on public services, on the productive investment that we need, on housing, on tax avoidance or on the scandal of private finance investments. It is an insubstantial Bill from an insubstantial Government, with more tax cuts for the richest. I shall sum up by saying that the Tory party is financially bankrupt in Northamptonshire and morally bankrupt in Westminster. That sums up this Bill, and we will vote against it.

Question put, That the Bill be now read the Third time.