Finance (No. 4) Bill

Sammy Wilson Excerpts

Wednesday 18th April 2012 Commons Chamber

[Owen Smith]

I am not going to give way at the moment. I want to carry on with my speech, then I will give way again. Perhaps by then the hon. Member for Spelthorne (Kwasi Kwarteng) will have warmed up and will be able to give us some evidence, instead of more rhetoric.

[Sammy Wilson (East Antrim) (DUP)]

Much has been made of the effect of the top rate of tax on revenue and on competitiveness. Given that the Government have stated their intention to change the top rate of tax, is it not surprising that the Chancellor has said that he is going to initiate

“some real research into dynamic scoring, and what the broader economy effects are of changes to taxation”?

It seems that even the Government do not know the impact of the change in taxation.

[Owen Smith]

I knew it would be worth while giving way to the Treasury spokesman for the Democratic Unionist party. His intervention offers a contrast to some of the more pedantic contributions that we have heard from Conservative Members. He is right to say that it was far too early to make a decision, ostensibly based on evidence, just one year after the implementation of the new tax rate. That is what the Institute for Fiscal Studies has concluded, and it is what the Office for Budget Responsibility has effectively concluded in suggesting how uncertain the conclusions are. It is also, unfortunately, what the country is concluding.

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[Karl MᶜCartney]

Not at this point.

It has been interesting—and would be again—to hear from the Chancellor or his Ministers what positive signs we have seen from businesses after he announced the change. Once again, why does the Labour party fly in the face of business leaders’ opinion? As I have said, the 50p tax rate raises only a fraction of what was intended and is bad economics. It is better to put the British economy first, ahead of cheap headlines, but then that was never the Labour way, was it? One would have thought by now that Labour might have learnt some economic lessons.

The cut in the 50p tax rate was never a priority of this Government. Raising the personal tax allowance and helping low and middle income earners has always been the No. 1 priority tax cut for the Government and that is what we have done. This is a Budget to be welcomed by all with far-reaching tax reform that Labour should be embarrassed it never even considered. It announces the largest ever increase in the personal tax allowance, which will benefit 24 million ordinary families up and down our country. Most basic rate taxpayers will gain at least £220 every year. In total, this Government will have taken 2 million low paid people out of tax altogether.

Labour spent much of the aftermath of the recent budget indulging in photo calls in unfamiliar territory for Labour Members—any pasty shop they could find. Even an unannounced visit to my own constituency of Lincoln by the photogenic brother of the Leader of the Opposition, the right hon. Member for South Shields (David Miliband), featured such a stunt. Among all this new-found fondness for pasties, but perhaps notably not for one bottle of a famous brown sauce, the Leader of the Opposition has strongly criticised the decision to cut the top rate from 50p.

The right hon. Member for Doncaster North (Edward Miliband) made a laughable claim when he said:

“After today’s Budget, millions will be paying more while millionaires pay less.”—[Official Report, 21 March 2012; Vol. 452, c. 809.]

He is the true heir to Blair, is he not? Soundbite, not substance—and not even basic mathematical understanding. After this Budget, not only will millions of people pay less tax, but many low earners will pay little or no income tax. If, as we know, the 50p top rate raised only a fraction of what was intended and in addition harmed our international competitiveness and, as other Budget changes have ensured that the direct cost of the reduction to a top rate of 45p has been mitigated many times over, that should surely be welcomed by Members on both sides of this House.

[Sammy Wilson]

Let me make it clear that my party is not a party of high taxation. We do not wish to see people squeezed until the pips squeak and we are not ideologically committed to high taxation.

[Michael Ellis]

Are you sure?

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[Sammy Wilson]

The hon. Gentleman asks whether I am sure. The record is open to scrutiny. In local government in Northern Ireland, when the Democratic Unionist party is in control of any council its rates are the lowest. In the Northern Ireland Administration at Stormont, where again we have control of the finances, we have more generous tax allowances for manufacturing industry and we have held local taxation frozen at the same point for the past four years and for the next three years. The hon. Gentleman asks from a sedentary position whether we are sure, but we stand on our record. When we have the ability to influence or the possibility of influencing taxation, we want to be a party of low taxation.

My comments in this debate are predicated on such policy and should be set against that background. I want to address the reduction in the top level of tax from 50% to 45%, which I believe is a huge political mistake for the Government. More importantly, I believe that it will impact on the ability to deliver sound fiscal policy and economic policy across the United Kingdom while getting people behind the measures that are required to get us out of our dire present situation.

The Government’s main argument has been that this is a good, sound economic policy and that it is necessary for a number of reasons. It is necessary, first, because the 50p rate of taxation has not worked: it has not raised the intended revenue. Indeed, the Prime Minister today claimed that it had not raised any revenue, but if he had read the documents that his own Chancellor endorsed he would have found that that is not true.

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[Richard Harrington]

Will the hon. Gentleman give way?

[Sammy Wilson]

Yes.

[Richard Harrington]

I am grateful to the hon. Gentleman for giving way and sorry for interrupting him mid-sentence, but in welcoming you, Mr Hood, to the Chair, I should like to ask him this question. Does he believe, as I do, that there are circumstances in which economic beliefs have to take precedence over political ones? Governments have to consider what they believe to be good in the long term for the country, for the economy and for growth, not just what might appear in newspaper headlines.

[Sammy Wilson]

I do agree, but if the hon. Gentleman had been listening he would have heard that the economic case—that we did not raise as much revenue as we should, that we will raise more revenue than we were doing and that we will improve the competitiveness of the UK economy through this new measure—has not been made. [Interruption.] The hon. Gentleman laughs, but on the basis of the Government’s own publication, the economic case has not been made.

[Richard Harrington]

To be clear, that is not what I was asking. I accept that the hon. Gentleman does not believe that the current economic policy is the right one, but does he accept my view that in many circumstances Governments have to consider what they believe to be the best economic case over and above the politics of the situation?

[Sammy Wilson]

That may well be the case. However, if a Government have to make that decision—and, yes, there are occasions when that has to be done— they must first convince people that the economic case is sound, and on the basis of the Government’s own published information, that is not so. Indeed, even the Prime Minister did not seem to know what his own Government’s information said when he was answering Prime Minister’s questions earlier. It cannot be argued that there are times when the economic case is more important than the politics and so the right decision has been made, because the Government have not made a sound economic case.

We have a political context in which the Government are saying to people: “Make sacrifices. If you’re working in the public services, take a pay freeze. If you’re a motorist, you’re going to have to pay more for your petrol. If you’re a pensioner, you must have your tax allowances frozen for some time so that allowances can catch up, with the result that you’re collectively going to lose £1 billion a year. You’re going to have to do this because we’ve got a deficit that we’ve got to address.” I could go through a whole lot of other measures. If people are going to be asked to follow a policy that is designed to reduce the deficit and to accept those impacts on their standard of living, they must understand that the weakest are not being selected for the heaviest burden. This decision is not only economically flawed but politically flawed because it will call into question the Government’s sincerity when they argue that we all have to make sacrifices together.

I have another role in Northern Ireland as Finance Minister. We have frozen wages. We have stopped all bonuses in the public sector where that has been possible and there are no contracts. We have said to people that there will be no recruitment or promotion within the public sector. We have said to people who work in the private sector, “You’re going to have it tougher because we’re going to be spending less on public sector contracts and so on, with the impact that that has on people’s jobs.” We have said about new house building and a whole range of other things, “This can’t be done.” We have said to voluntary groups and community groups, “You’re going to get cuts in your grants because we don’t have the money to do this.”

By and large, I have found that most people accept that when they see that it is evenly spread. People stop me in the street all the time and talk about the impact that it is having on their lives. They say, “We don’t like it, but if we have to put up with it because we know we can’t carry on spending money we don’t have, we’ll do it.” Nothing undermines the argument made by those of us who wish to be responsible about the budget deficit more than the news that the Government are saying to people, “Make sacrifices”, while those who are earning more than they need to live on will get a 20% or a 10% tax cut. That is why the politics of this is all wrong. The economics is not sound and the politics is not sound, and for that reason we will vote against it.

[Alun Cairns]

Thank you, Mr Hood, for calling me to contribute to this debate on amendment 1. It is a privilege to follow the hon. Member for East Antrim (Sammy Wilson). I accept some of his points about the importance of the economics, but I certainly do not agree with his conclusion. I will comment on the weakness of the argument presented by the hon. Member for Pontypridd (Owen Smith) a little later.

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[Alun Cairns]

I could not agree more with my hon. Friend. Once again, he makes a cutting point that exposes the weakness of the argument of the hon. Member for Pontypridd.

The politics of this measure is that it sends a message to international investors that Britain is once again open for business. The 50% rate needs to be added to the national insurance rate. People could well be paying a tax rate well in excess of 60%. For some individuals, it is as high as 68%. What sort of message does that send to international investors? The politics of this is extremely important in relation to how it is interpreted by the people we want to attract to this country, because they will bring their capital with them.

[Sammy Wilson]

I am not sure what Government Members are saying is causing the lack of investment. Is it the situation in the eurozone—I agree with the hon. Member for Dover (Charlie Elphicke) about that—or is it because of the high rate of taxation? The hon. Member for Vale of Glamorgan (Alun Cairns) seems to agree with both propositions.

[Alun Cairns]

I am sure that the hon. Gentleman would recognise that there is no silver bullet. I suggest that there is a range of issues. It is partly to do with the eurozone, partly to do with the debt that we inherited from the previous Government and partly to do with the global environment. Thanks to the Chancellor and the Treasury team, we are putting Britain on the road to the recovery. The reduction of the rate from 50% to 45% is central to that because of the message that it sends to every investor around the globe, as I have outlined.

We must recognise that we have had the highest tax rate in the G20. That has an effect when international companies consider where to invest. The G20 countries are in the top league of where international companies spend their money. Obviously, I want us to be seen as the most competitive nation in the league, not for us to be at the bottom of the league. That is the situation that we inherited.

The message of the Labour party consists of nothing more than envy. Labour fails to recognise that the top 1% of earners pay 30% of the income tax in this nation. The marginal rates are exceptionally important, as has been mentioned. We need to create an environment in which Britain is open for business and make it an attractive nation to investors from the UK and from elsewhere.

The argument presented by the hon. Member for Pontypridd is hollow. He misses a number of points. First, the 50% rate was intended to be a temporary rate in the first place. In response to interventions, he said that he did not think that the temporary rate should be adjusted just yet. How temporary is temporary? He gave the impression in his response that the rate should remain at 50% for the remainder of this Parliament. That would take us up to eight years of this temporary tax. He said in another response that he could not predict the Budgets that would happen after the next general election. There are three years remaining in this term. He cannot have it both ways. He says that the temporary tax should last for eight years, but that he cannot predict what will happen in three years’ time. The reality is that the Labour party is merely presenting the politics of envy. It wants to be the tax-and-spend party once again. It was the tax-and-spend party when it left office, and it has done little to move on from that position.

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[Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)]

I rise to speak to amendment 8 in my name and those of my colleagues, and I should like to press amendment 61 to a Division.

I am short of time, so I shall keep interventions to a minimum. There has been co-operation among the parties to try to give hon. Members time to speak, and I shall try to keep my part of the bargain.

In fact, I have risen to speak in favour of a Government policy—a well-thought-out policy that would do wonders for the economy. I am speaking, of course, of the devolution of air passenger duty to Northern Ireland. I like that great idea so much that I should like APD devolved to Scotland as well. We want equality of treatment and opportunity for Scotland.

In reality, I and many in Scotland, and the aviation industry, feel that APD is unfair and that it places an undue burden on business and travellers at a time when the Government should be encouraging the movement of people and goods to spur economic growth. The amendments in my name and those of my hon. Friends therefore propose to halt the rise in APD and devolve the power to Scotland, which is a recommendation not only of the Scottish Government, but of the Calman commission.

The idea of the cut in APD is simple: the UK already has the highest APD in the world, which surely cannot boost economic growth. The industry has had its say. Derek Provan, managing director of Aberdeen airport has said:

“Aberdeen, Edinburgh and Glasgow airports issued a joint letter to the Chancellor ahead of the Budget calling on the UK Government to create a level playing field for the UK aviation industry, which is subject to the highest aviation taxes in the world…The leaders of BA, EasyJet, Ryanair and Virgin Atlantic also jointly warned that the double inflation increase would hit ‘millions of hard working families in the UK.’ They said a family of four flying economy class to Australia would pay £500 in APD, whereas in 2005, they would have paid just £80. BA also recently revealed that it had plans to halve the number of new recruits in 2012 as a result of APD.”

Jim O’Sullivan, managing director of Edinburgh Airport, has said:

“APD is already costing Scotland passengers and having an impact on tourism revenues. We know from discussions with our airline partners that it is a major factor in their decision to connect further routes to Scotland. We would urge the Westminster Government to see Scotland as it does Northern Ireland and understand the need to both reduce and devolve this unfair and damaging tax.”

[Sammy Wilson]

I agree with much of what the hon. Gentleman has said about the general level of APD, but does he not recognise that this measure is the result of the climate change legislation passed in a previous Parliament which his party supported? The chickens are coming home to roost, with extra green taxes being imposed on poor consumers across the United Kingdom.