John Redwood’s contribution to the Finance Bill debate, 7 April

Mr. John Redwood (Wokingham) (Con): Before he sits down, will the Minister please supply the House with the figures showing what difference those measures will make to the revenue forecast for the immediate year?

Mr. Timms: I can give the right hon. Gentleman some of those figures, and we can perhaps return to individual figures when we consider the amendments that I have tabled. The total gain to the Exchequer from the higher rate of cider duty in a full year would be £15 million. The landline duty will start in the course of this financial year, but in a full year it is estimated to raise, from memory, £175 million, to be used in ways that he will know about. I am not sure whether there is a score against clause 58, but there is a score against clause 65 and schedule 21, which deal with furnished holiday lettings. Again from memory, if the provision was left unamended, the impact for the Exchequer in a full year would be in the order of £30 million.

Mr. Redwood: I cannot allow the Minister’s last observation to go unchallenged. How does he explain the extraordinary decisions first to starve the money markets of funds in 2007 and weaken the banks, and then to publicly demand that the banks raise more capital too late-when they could not do it-and to jeopardise them or bring them down? How can that be described as calling the shots correctly?

Mr. Timms: I refer the right hon. Gentleman to an experience that he will remember very well-that of the recessions of the 1980s and 1990s. In both those recessions, when the global circumstances were much less difficult than those that we have experienced in the last couple of years, the number of people claiming unemployment benefit rose to 3 million. At present it is a little over 1.6 million: it has fallen over the last few months. During the recession of the 1990s, business failures were running at about twice the rate at which they have been running during the current recession. At its peak, the number of home repossessions was 75,000 during the 1990s recession. At the beginning of last year, the Council of Mortgage Lenders predicted that it would be 75,000 again, but I believe it was 43,000.

I think it is clear that the approaches we have adopted to the problems encountered around the world have been the right ones, and have greatly limited the damage that would otherwise have been suffered. Indeed, much less damage has been suffered than was the case in the 1980s and 1990s. The Finance Bill keeps us firmly on the right track, and I commend it to the House.

Mr. Redwood: Will the hon. Gentleman clarify what the Liberal Democrats think about the wisdom of making cuts of £700 billion on the RBS balance sheet in a single year? The Government shrank the balance sheet by that amount-it is half of national income, judged by UK standards-so what impact will that have on tax revenue and activity levels?

Matthew Taylor: I will not go into the technicalities, but we need to be straight about the balance sheets and to tackle the underlying problems in the banking sector. We need to separate the investment and gambling side of what the banks do from the retail side, and we therefore need substantial further reform.

Mr. John Redwood (Wokingham) (Con): I remind the House that I have declared in the Register of Members’ Financial Interests the fact that I advise an industrial and an investment company.

This is a disgraceful end to a dreadful Parliament. Tonight, we are invited to hasten through the large and contentious Digital Economy Bill, which we were able to debate only briefly yesterday, revealing the degree of disagreement about it. At the same time, we are given a very short time to debate Second Reading of the Finance Bill, and several other Bills have been rushed through today.

Of course, Ministers are right to say that any Government coming to the end of their term or seeking re-election in springtime may need to put a Finance Bill through Parliament quite quickly, but the convention has always been that if they need to do that, they put through a short, basic Bill, just to keep the revenues flowing in, and they make the big decisions in a later Budget, when there is proper time for a big Bill and proper scrutiny.

It really does beggar belief that we have been placed in this invidious position yet again. Most people in this country who are interested in politics have had 6 May in their diary as the general election date for many months. It appears that the only person in the country who had not got that clarity of view was the Prime Minister, but he got there in the end, and decided that the election would indeed be on the date that everyone else had put into their grids, plans and media schedules. So why on earth did the Government not hold the Budget at the beginning rather than the end of March? Why on earth, having held a late Budget, did the Government not get on with a more rapid preparation of the Finance Bill? In the past couple of weeks, when the House has not been that busy, we could have had a stab at debating it properly.

I do not object to having a Finance Bill that keeps the revenues coming in over the election; of course I understand the need for that, given the amount that the Government are spending and having to borrow. But I do object to being given 167 pages of Finance Bill on almost the last day of serious parliamentary business, and to being told that there will be just a few hours in which to debate all its stages.

My hon. Friend the Member for Fareham (Mr. Hoban) and his Front-Bench colleagues wisely said to the Government that they must strike out three of the nasty little tax increases and new taxes that they wanted to place in the Bill, and I am delighted that the Government have agreed to do that; that is an improvement to the version of the Bill that we have in our hands for this debate. So recent was the agreement that we do not even have the right document to debate; the one that I have still does not have the necessary changes or amendments to the Government’s line. The Government must have known that the Opposition would not let through the new taxes or tax changes, which would have had adverse effects on important groups in our country, yet we are still given a text that implies that those measures will be introduced.

Like my hon. Friend the Member for Fareham, I welcome lowered bingo duty, the exemption from stamp duty and the other few crumbs in the Bill that recognise that Britain is now a grossly overtaxed country, and that high taxes are now an impediment to enterprise, growth and success-things that all Members here surely want. However, we had to listen to the Minister wandering off the subject and saying, in his opening remarks, that the Government got every economic call right, and I find that very difficult to accept.

This is the Government who said that they had abolished boom and bust, but they put the economy through the biggest boom and bust that any of us have ever seen in our lifetimes-a boom and bust far bigger than anything inflicted on this country since the great recession of the 1930s. This is the Government whose calls included building a debt mountain in the public and private sectors with easy money and low interest rates up to 2007, and who then decided to trigger an avalanche of debt collapse and collapsing asset prices by withdrawing all the money and restricting the banks too late in the cycle. That threatened the banks themselves and brought the system almost to its knees. This was the boom-and-bust Government to beat all boom-and-bust Governments. This is the Government who did unparalleled damage to our economy, yet the Minister dares to come here this evening to make party political points about how they got everything right. He should be concentrating on this mean and miserable Finance Bill, which he wishes to rush through without proper scrutiny.

Why do we need proper scrutiny of a Finance Bill? We need it because many people’s livelihoods and working futures depend on the tax legislation that this and other Governments put through Parliament. Every one of the clauses could create joblessness, difficulty for a business, or problems for someone trying to wrestle with the complexities of an economy scarcely out of recession and performing very lamely and badly.

The Bill ranges extremely widely. We are asked to agree to items on income tax, corporation tax, capital gains tax, stamp duty land lax, inheritance tax, alcohol and tobacco duties, vehicle excise duties, fuel duties, environmental taxes, gambling, new taxes, losses and capital allowances, charities, the remittance basis relating to taxation, and international tax matters-and I am not even halfway through the list that we are invited to consider.
It is an insult to the people we represent, to the House of Commons and to democracy that the Government say they wish to strengthen that we are given this very shortened time when most colleagues wish to be back in their constituencies, starting to dust down their campaign plans, or carry on with the campaigns that some have already started, for obvious reasons, particularly those who worry about how their electorate might respond to the way that the Government whom they support have been handling events.

It is difficult to allow all this to go through without proper scrutiny because it means that none of these clauses has been properly tested. We have not had the chance to consult experts outside on whether each of the clauses will do what the Government intend, and we have not been able to consult people who will experience the impact of those clauses to see whether what the Government intend is fair and reasonable, given the parlous state of the British economy as we meet here this evening.

Mr. Cash: Just to take one example, which I hope to come on to in a moment, does my right hon. Friend, or could anybody, including the Ministers, have the foggiest idea what the “appropriate pension increase” is when it is defined as (ACP x CAPARF) – (UOP x OAPARF)?

Mr. Redwood: Indeed, that has defeated me, and my hon. Friend is right to point out that that is exactly the kind of complexity that in a normal Committee stage we would ask a Minister to explain, and a good Minister would be able to explain it and a not-so-good Minister would know an official who could help to explain it, and we would also have had the chance to consult people who are experts in the field so that we could either pass over something quickly because the experts said it was perfectly reasonable, or they would say it would not work or would have unforeseen consequences. The inability to give it such attention will doubtless mean that the Government and their successor will come to regret the legislation, and will doubtless mean that some future House of Commons has to reopen these issues and put them right.

There is also a very complicated formula relating to capital allowances on page 81, similar to the pension formula that my hon. Friend read out. I will not detain the House by reading it out, because it is quite obvious that no one here today is equipped to discuss it sensibly. It means that these complicated matters will go through on the nod, not only with insufficient explanation but probably proposed by Ministers who have not teased them out and understood them fully, and certainly approved by a House of Commons that has not had the chance to do its normal job.

Voters elect to this House a variety of people with a range of experiences, talents and skills, and often individual Members have the experience needed to tease something out. But the complicated area of tax law, where the whole panoply of accumulated tax law is enormous, thanks to this Government’s legislative energy, is one area where we all feel that we need some professional advice before we can do our job of scrutinising the Finance Bill.

Mr. Cash: Does my right hon. Friend agree that part of the problem is not just the complexity, but the consequence for and the burden on the taxpayer, who then has to employ accountants, lawyers, QCs and so on, at enormous expense, which thereby reduces our ability to be an enterprising nation?

Mr. Redwood: I entirely agree. I favour lower taxes because they are fair and raise more revenue, and I think they raise more revenue for that very reason. Lower and simpler taxes impose less of a burden on people, who are then more willing to work harder and do not have to spend so much of their working time dealing with complicated tax issues to avoid falling foul of growingly complex and difficult to understand legislation.

We are now in the position where many people subject to a specialist tax in their area cannot understand the formula or the rationale and need to take on expensive tax advice to comply with the legislation. This can apply to quite small businesses that do not have that kind of resource and are not used to employing expensive accountants or lawyers but are forced into doing so by the enormous complexity.

So it is with a very heavy heart that I see that the Government’s dying wish is to go out as they came in and be remembered as the Government who did more than any other we have known to add to the volume of tax legislation and the complexity and imperfect working of the tax system. Many Governments have queued up to win that prize, but this Government have beaten the rest of them hands down with their doubling of the length and complexity of the tax provisions in this country. To slide out 167 pages, 71 clauses and attached schedules this late in the Parliament, and then to offer us no time in which to probe or examine them, is typical of them but a complete disgrace.

The time available this evening does not permit me to go through the Bill even generally, clause by clause, much as I would like to and my colleagues would be grateful if I did not. However, that illustrates what is wrong with the situation: a 71-clause Bill, tackling every major tax and quite a few minor taxes in the country, with a view to changing them in some way and often to increase the amount of money that they raise, will not be properly scrutinised because of the way the Government have decided to behave.

The Government claim to have made all the calls correctly but they need a Finance Bill to raise more money. This, of course, is not that Finance Bill, because it is the pre-election Finance Bill, and we have already heard from the Minister that it does not include one of their main tax-raising proposals, which, if they win the election, will be the national insurance tax increase. So we know that the Government would have to come back to the House with more tax-raising legislation, but we know also that, even with their limited ambitions for deficit reduction in the next year or two, there is still a big black hole in their total figures. We know that the Budget, when delivered, did not have a proper statement of spending plans and cuts. There was a global figure for many cuts, but we do not know where they will fall or how they will be handled. And we know that there was a global figure for tax increases. The Government will say that this Bill does some of the work on that, but it in no way covers all the increased tax revenue that they have forecast, because they wish a bigger share of the deficit reduction to be achieved by tax increases than the Conservative Opposition do.

Sir Nicholas Winterton (Macclesfield) (Con): My right hon. Friend has just mentioned the imminent increase in national insurance, although it is not part of the Finance Bill. Surely, however, that must be part of our debate, because it will affect employment in manufacturing and commerce. At Prime Minister’s questions today, the Prime Minister made great play saying that the increase was necessary to provide for education and the health service, but what is more important: increasing our manufacturing capacity and output, and thereby increasing our tax revenues; or harming manufacturing industry merely to sustain what are, I accept, important-education and the health service?

Mr. Redwood: Madam Deputy Speaker, I do not think my hon. Friend was in the Chamber for your very wise advice to others in this debate-that we must stick to the contents of the Finance Bill, or to the things we would like to see in it, because some of us would have liked to move amendments to improve it, but we will not be able to do so owing to the restricted time. I fear that, because national insurance will be legislated for differently, it does not strictly fall within that remit. However, I think my hon. Friend stayed in order, because he wisely said that the national insurance increase could have such a damaging impact on the general state of the economy-it will definitely restrict growth and it is a tax on jobs, as even Ministers admit-that it could damage the revenues for which the Bill makes provision.

At the beginning of the debate, I tried to tease out of the Minister by way of an intervention what he thought the revenue loss would be on his figures if we struck out or modified the four clauses to which Opposition Front Benchers object. He said that in a full year he thought it would cost £220 million. However, other measures in the Bill and more generally could lose the Government rather more revenue than that, because they have made such an assault on enterprise, business, growth and development that they might find that higher tax rates, far from yielding the increased revenue that their models predict, yield rather less or, in some cases, even lead to a drop. We may well find that there are timing differences on tax payments and that there is a change in the place of residence to which businesses and rich individuals might relocate. The Government might find that they have gone over the top with the rates and will have a problem filling part of their budget black hole through the tax revenue that they will collect if they stay in office.

On all those grounds, this is a very bad Bill. It is not a Bill for recovery, because it does not offer the tax incentives for growth that one would expect to see. It confirms the pattern of taxing more and subsidising more that has characterised the more recent years of this Government’s lack of progress. It greatly increases the complexity and detail of the tax code in a way that is wholly inimical to the wish of honest people to get on with earning a good living and running a good business, as my hon. Friends and I have sought to set out. Above all, it misses the main points because it does not tackle the spending side of the equation, which is being kept secret until after the election, or bring in some of the biggest tax rises that the Government are planning, which have to be introduced in another way.

The Government are now attempting to drive the car of the economy with one foot flat on the accelerator pedal, trying to create as much easy money as possible, and the other flat on the brake because they are trying to restrict the banks as much as possible. That is, of course, the way to go absolutely nowhere. It surprises me that they can present a Finance Bill such as this and say that it is part of a package of recovery, when we have experienced the longest recession of any of the major economies and had about the feeblest signs up upturn. The Government say that that means we have done very well, but it clearly means that we have done very badly. It is quite obvious why-they chose the wrong point of the cycle at which to clobber and restrict the banks. They should have restricted, managed and regulated them properly on the way up and not brought them juddering to a halt as they did in 2007-08.

The Government are still doing that to the banks, as I have been trying to illustrate to Members on the Treasury Bench, by taking £700 billion out of the balance sheet of our leading bank, the Royal Bank of Scotland, which they happen to own. No Treasury Minister has ever explained why they are doing that. This Bill contains provisions for another tax on banks-I understand how popular that is-but does not make provisions for expanding banks. Surely what we need, if we are to have a positive and strong recovery, is banks that can expand their lending to British business and individuals sensibly, so that there is an increase in private sector demand as well as the limited increases in public sector spending that the Government think represent the way to a recovery.

Driving with one foot on the accelerator and one on the brake is the way to go absolutely nowhere. The Government are creating a lop-sided economy with fast-expanding public spending and fast-contracting private sector debt and activity in many areas. That is the way to national bankruptcy. This Finance Bill will not raise anything like enough revenue to pay for the huge amount of spending that they are proposing. Their model of running the economy will not lead to a rapid recovery of the kind that we desperately need, and it will not create the jobs that we need to get people off benefit. That is the type of public spending cut that I would like to see-really big cuts in the social security programme because people have gone back to work or got a job for the first time and do not need benefit any more. Surely that is a cut that we can all agree on, but the Bill will not deliver it because it does not provide the friendly tax environment for business and enterprise that must be required if we are to get a decent recovery.

My right hon. Friend the Member for Witney (Mr. Cameron) made an excellent response to the Budget and reminded the House that, under this Government’s lack of tender care, the UK has gone from being the fourth best tax regime for business in the free world to being the 84th best, which is a dreadful reduction in our tax competitiveness as a result of the measures in this and other recent Finance Bills. That is why our economy is not going anywhere-because of an anti-enterprise Finance Bill and because the Government will not sort the banks out properly. Until Ministers can explain to the House why they have pursued a boom and bust policy towards the banks, we will not have a proper explanation of the mess we are in, and until they come forward with a Finance Bill that is pro-enterprise, we are not going anywhere fast.

I hope that this farce of a Finance Bill will end as soon as is humanely possible. We need a new Budget that does the spending and taxation together and is honest with the British people about both sides of the equation. We need a new Budget that leads to a proper Finance Bill that has rates of tax that might support and promote growth.

Mr. Redwood: I agree with the hon. Gentleman, but can he confirm that while tax is now two thirds of the pump price-the Government’s imposition is a big reason why the price has gone up so much-the huge devaluation of the pound also means that the sterling price of oil has gone up far more than the dollar price?

Stewart Hosie: The right hon. Gentleman is right about the impact of currency fluctuations. He is right that duty and tax amount to approximately two thirds of the price of a litre, but the real killer is in wholesale diesel. Before tax, our diesel is among the cheapest in Europe; after tax, it is possibly the most expensive. From my point of view, as a Scot in an oil-rich nation, I find that quite abhorrent, especially when people are struggling to make ends meet and when we are seeing six rises-a 17 per cent. hike-in fuel duty over two years.

Mr. Redwood: Does my hon. Friend, like me, wonder who the Government think they are fooling? The markets are already making this Government pay a lot more to borrow than the German Government do, because they know that this Government have borrowed an awful lot more than the German Government have.

Mr. Cash: Indeed, that is completely true. I do not claim to be an expert economist by any means, but I am certainly trying to be analytical about the figures that I can see. I sometimes wonder whether the economists are quite as good as they are cracked up to be, because they quite frequently seem to get these things wrong. I acknowledge my right hon. Friend’s point in relation to the veracity that can be attributed to the figures that we are given. As we saw only yesterday, in Greece there is a massive shortfall-

Mr. Redwood: I wonder whether my hon. Friend will be able to catch the eye of the Exchequer Secretary, because I am sure that she would love to intervene to explain this.

Mr. Cash: I do not want to embarrass the Exchequer Secretary. I am sure that she does not have the foggiest idea what I am talking about. I find that slightly alarming, given that we are about to have a general election and all the birds have flown-there is not a single person standing or sitting behind her. They have all flown back to their constituencies and landed the British people with this nonsense, which we are debating.

Mr Redwood: I congratulate my hon. Friends on getting those unpleasant taxes out of the Bill. Will my hon. Friend confirm that, as this is a Finance Bill, the Government, who have a majority in this place, can still do what they like, because the other place cannot stop the Bill?

Mr. Gauke: Of course, the other place does not have a view on the Bill. It is a matter of timing, and I am pleased that those of my hon. Friends who were engaged in negotiations on the wash-up were able to achieve three measures that prevented tax rises. Of course, they are only temporary measures. Stopping them properly is not in our hands or the Government’s; it is in the hands of the British people.

Mr. Redwood: Will the Minister explain why not a single Labour Back Bencher has attended most of the debate? No single Labour Back Bencher has thought it worth speaking on this very wide-ranging Finance Bill.

Sarah McCarthy-Fry: I am sure that our Back Benchers can speak for themselves on why they were not here. They have certainly been involved in the Budget process, and I am sure that they have confidence in those on the Treasury Bench to put the Finance Bill forward.


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  4. Frugal Dougal
    April 12, 2010

    Very worrying indeed – and very well said!

  5. Lindsay McDougall
    April 13, 2010

    Well done. It was very important that someone senior in the Conservative Party put this on the record. Putting dissatisfaction on the record in a logical manner will give us greater authority when we come to amend or repeal what will be the Finance Act.

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