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Commons Chamber

Volume 560: debated on Tuesday 12 March 2013

House of Commons

Tuesday 12 March 2013

The House met at half-past Eleven o’clock


[Mr Speaker in the Chair]

Business before questions

London Local Authorities and Transport for London (No. 2) Bill [Lords] (By Order)

Consideration of Bill, as amended, opposed and deferred until Tuesday 19 March (Standing Order No. 20).

Oral Answers to Questions


The Chancellor of the Exchequer was asked—


Under this Government, Britain has moved into the top 10 of the most competitive places in the world to do business, according to the World Economic Forum; our tax system is seen as one of the most pro-business in the world; market interest rates are at record lows; red tape has been cut by almost £850 million in the past two years; and exports to China, India and Brazil are up by almost two thirds since 2009.

I thank the Chancellor for that reply. Is he aware that, according to accountants KPMG, Britain is now the best place in the world to do business, for the first time ever? That is very welcome news for businesses in my constituency, but what more do we need to do to maintain and consolidate that position?

My hon. Friend refers to the remarkable survey by KPMG that found that in the space of three years Britain has gone from having one of the least competitive business tax systems in the world to having the most competitive one; we are ahead of Ireland, the Netherlands and Luxembourg, as well as, of course, the United States, France and Germany. That is because of the hard work we have done on corporation tax and on the controlled foreign companies regime. Of course, we have to go on making this country the most competitive place to do business, so that we can succeed in the global race.

Is it not the truth that demand has been so sucked out of the economy by the Government’s policies that there just is not the growth? Telling us how competitive we are is living in cloud cuckoo land, given that even the Office for Budget Responsibility says that growth is going to be very slow, even in the coming year.

To get a lecture from the Labour party on demand! The economy shrank by 6% when the shadow Chancellor was in the Cabinet, and we are picking up the pieces of the mess he and his party left behind. One of those pieces was the deeply uncompetitive business tax system which meant that companies were moving their headquarters out of the United Kingdom. Companies are now moving into the UK because of the changes we have made.

It is small businesses in our constituencies that will hold the key to Britain’s economic revival. Does the Chancellor agree that they are simply not getting the support they need from the banks at the moment and that although the funding for lending scheme is good, most of the money is currently going into mortgages rather than businesses? I realise that he will not want to say much now, just before the Budget, but can he at least reassure the House that the needs of small businesses are right at the top of his agenda for this Budget?

My hon. Friend has that assurance. The funding for lending scheme, joint with the Bank of England, is now supporting the small and medium-sized business sector as well as the mortgage market, and is repairing the damage to the financial system caused by the financial crisis. He is also right to say that small businesses are the bedrock of our economic revival, which is why we have cut the small companies tax rate, which before the general election the Labour party wanted to put up. We have also carried on the relief for small businesses from business rates, and in the autumn statement we increased tenfold the annual investment allowance, so that small businesses can invest for the future and create jobs. The Government understand that there needs to be a private sector recovery in order not to repeat the mistakes of the past.

The Chancellor boasts that all is going well for British business, but terrible figures out this morning show that manufacturing is down by 3% compared with last year’s figure. Business has lost all confidence to invest, so when will he pull his head out of the sand and see that his plan is clearly failing?

The manufacturing sector halved as a share of the British economy when Labour was in office and we had the fastest decline in British manufacturing in British history. The steps that we have taken to support manufacturers, to help with investment allowances and to ensure that they have access to fast-growing parts of the world, such as China and India, are all part of rebalancing and rebuilding the British economy. I was in the west midlands a couple of weeks ago, and there are 67,000 new private sector jobs in that region alone; I mention the region because private sector employment fell during the boom years under the previous Labour Government. We must get behind the private sector and we must get behind business: that is exactly what this Government are doing.

Credit Rating

2. What recent assessment he has made of the UK’s credit rating; and if he will make a statement. (147124)

As I said to the House last month, the recent Moody’s decision was a stark reminder of the debt problems facing Britain and the clearest possible warning to anyone who thinks we can run away from confronting them. We will not do that.

When he was shadow Chancellor in 2009 and Standard & Poor’s put the UK on negative watch, the right hon. Gentleman was unequivocal in calling for a general election. Now that the UK has lost its triple A status on his watch, will he be consistent and urge his right hon. Friend the Prime Minister to go to the palace?

The advice from the rating agency could not be clearer: a reduced political commitment to fiscal consolidation would put Britain’s creditworthiness at risk. That reduced political commitment would come from the Opposition, who oppose every single spending cut, who have no credible economic policy and who, despite having promised for two years to produce a deficit reduction plan, still do not have one. We hear that a draft Labour manifesto is coming this July; perhaps then we will see a proper plan to deal with the deficit Labour created.

Does my right hon. Friend agree that the only true measure of creditworthiness is the price paid by the Government to borrow? Gilt yields are still 16 points lower today than before Moody’s downgrade. Does that not reconfirm the international markets’ confidence in this country’s ability to pay its debts and the Chancellor’s programme to tackle Labour’s deficit crisis?

My hon. Friend is right that our credibility as a nation is tested every day when we seek to borrow money to pay for the deficit that the Opposition racked up. We can borrow at historically low rates, which means low rates for people’s mortgages and low rates for people’s small business loans. Of course, if we lost that credibility by pursuing the Opposition’s policies, interest rates would rocket, people would be put out of their homes and businesses would go bust. That is exactly what we will avoid.

I am sorry; we cannot let the Chancellor wriggle out that easily. Does he remember writing his pre-manifesto paper, “A New Economic Model: Eight Benchmarks for Britain”, just before the last general election? In it, he said that

“for the first time, the British people will have eight clear and transparent benchmarks—Benchmarks for Britain—against which they can judge the success or failure of their Chancellor and their government over the next Parliament. We will be accountable.”

Will he remind the House of his first benchmark test?

Our benchmark was to restore the fiscal credibility of this country and that credibility has earned us record low interest rates. The hon. Gentleman talks about wriggling out of things we did in the late period of the last decade, but he ran the leadership election campaign for the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown)—he was the campaign manager—and he should apologise for that disastrous premiership and the chancellorship that preceded it, which put this country in this mess in the first place.

We are all deeply moved by the Chancellor’s remorse and contrition, but let me remind him of his first benchmark test:

“We will safeguard Britain’s credit rating”.

He has failed on the other benchmark tests, too: he said that he would ensure greater availability of credit to small and medium-sized enterprises; he has failed on economic growth; he is failing on borrowing and the deficit; and he is failing on living standards. After three years of failure, when will it dawn on the Chancellor that his strategy is not working?

We have cut the deficit by a quarter, a million new jobs are being created in the private sector and there is record employment in our economy, as well as record female employment. We are rebalancing the British economy after all the problems of the past. The hon. Gentleman talks about remorse and contrition, but until we hear some remorse and contrition from those on the Labour Front Bench about the economic mistakes they made, no one will pay the slightest attention to what they, and in particular the shadow Chancellor, have to say.

Given that the UK Government are able to borrow at historically low rates, may I urge my right hon. Friend to take advantage of that position in order to prioritise capital investment, particularly in the housing market, to give a strong fillip to growth?

We have increased capital investment from the period of the Labour Government. Capital spending as a percentage of our national income is more than under the Labour Government, and we have increased by £10 billion our spending on capital from the plans they left us. I agree that we should be using the Government’s credibility to do more, which is why the infrastructure guarantees and the housing guarantees are coming on stream. Guarantees are being written and that will help to build the infrastructure that this country needs.

Interest Rate Swapping

On 31 January, the Financial Services Authority published the findings of the pilot review into interest rate swap mis-selling. The full review of 40,000 cases is now under way, and the FSA says it should be completed within six months. Small business organisations played a major role in exposing the scandal, so I can announce to the House that from today bodies representing consumers, including small businesses, will be able to apply to make super-complaints to the Financial Conduct Authority, giving them fast-track access to the regulator. That important power should help to ensure that any future misconduct is detected quickly and put right.

I thank the Minister for that answer. My constituent, Mr James Boyle, has a contract with Clydesdale bank, which seems to be excluded from the review. The main banks—RBS, HSBC, Barclays and Lloyds—are all included. Why are the Clydesdale bank, and my constituent, excluded from the review?

I can confirm that the Clydesdale bank has now become part of the review, as have all the other principal banks. The hon. Gentleman has raised the case of his constituent with me before; even though the product was not within the review’s terms of reference, Clydesdale has agreed to consider it as part of the review.

I have constituents who are concerned that the FSA may come under pressure from the banks to water down its findings and reduce the scope of the redress scheme, to their disadvantage. What can my right hon. Friend say to reassure my constituents about that important issue?

My hon. Friend raises a very important point. The review is under the auspices of the Financial Services Authority, and each bank has had to appoint independent reviewers who are themselves accountable to the FCA. It is absolutely crucial that the objectivity they bring to bear cannot be compromised, and I have given the FSA clear feedback that it should have that in mind during the review.

Lending and Equity

4. What steps he has taken to increase the amount of (a) lending and (b) equity financing to the real economy. (147126)

The funding for lending scheme is aimed at boosting bank lending to the real economy and has already led to some of the cheapest mortgage rates on record. Through the seed enterprise investment scheme, the Government provide generous tax relief for investment in firms with high growth potential, and we will deploy an additional £1 billion through the business bank.

Does the Chief Secretary agree that raising share capital is a vital way to help businesses grow, in addition to loan finance? Between 40 and 50 extra initial public offerings in technology companies could come to the UK in the next six months if we get conditions right, so in the forthcoming Budget will the Treasury do all it can to help businesses access share capital?

I certainly agree that there is a need to diversify the range of funding sources, including the one my hon. Friend describes, particularly for small businesses and businesses with high growth potential. That is the purpose of the seed enterprise investment scheme. The business bank has a remit to try to diversify the range of sources of finance available for small businesses, because in this country we are too dependent on solely bank finance. I shall certainly consider what my hon. Friend said.

Small and medium-sized businesses are still finding it difficult to get banks to lend them essential finance. What further steps can the Minister take to reconnect banks with the reality of business? Up to now, it seems that banks have been a law unto themselves.

The hon. Gentleman makes a very good point. That is the purpose of a number of the schemes I mentioned earlier. The funding for lending scheme is designed to get banks to lend more to small businesses, and a complaints process has been put in place, allowing independent adjudication when cases go wrong. I encourage the hon. Gentleman to refer constituents to the scheme, which has overturned bank decisions in a large number of cases.

In welcoming the funding for lending scheme and the other measures my right hon. Friend mentioned, may I urge him to break up and sell off as soon as possible the publicly owned banks, so that we have more competition on the high street, and constituents of mine who are unable to borrow on good projects have more to choose from?

It is right that we own large chunks of two banks, because that was necessary to clear up the mess of the under-regulated, overheated banking system that was created under the present Opposition when the shadow Chancellor was City Minister. We are working as hard as we can to get those banks in good order and we are making progress in the direction that my hon. Friend suggests.

The experience of small businesses across the UK does not match the rosy picture painted by the Chancellor earlier or by the Chief Secretary to the Treasury. Last week we learned that, despite the funding for lending scheme, net lending to businesses was down £4.5 billion in the last quarter. Will the Chancellor now act on Labour’s calls to reform the scheme immediately so that small and medium-sized enterprises get the funding that they so urgently need?

I am sorry that we did not hear the apology for the mess that was made in the financial system by the Opposition when they were in office. Many of the steps that we are taking are necessary to repair the damage that the hon. Lady and her Front-Bench colleagues did to the financial system and the banking system. She should also have noted that net lending to the real economy increased by £2.5 billion in January 2013. The schemes that we are putting in place are making a difference, but we are facing a continuing very challenging situation and that is why we will continue to look for further things to do to help small businesses.

Unemployment (Halifax)

The claimant count in Halifax in December 2012 was 4,328. The UK has a lower rate of unemployment than either the US or the euro area and, as the Chancellor said earlier, we have created more than 1 million jobs in the private sector since 2010.

I thank the Minister for that reply, but in reality the Government’s record on unemployment in Halifax since 2010 is that the number out of work has risen from 7.3% to 9.2%. Halifax cannot sustain those levels of unemployment for much longer. Can the Minister understand how angry people are? What action is he taking on unemployment in Halifax?

Of course I recognise what the hon. Lady says and that unemployment is a concern right across our economy. Unemployment rates across the economy have been coming down. She refers to the experience in her constituency. Since 2008-09 the number of apprentices in Halifax doubled, so some of the measures that the Government are taking, such as the investment in apprenticeships and the Work programme, are making a difference to her constituents. The most important thing that we can do to continue to support unemployment moving in the right direction is to maintain the credible fiscal policy that this Government have put in place, and not give up on it, as the Opposition would.


6. What recent assessment he has made of progress on the Government’s target of public sector net debt falling as a share of GDP in 2015-16. (147128)

The independent Office for Budget Responsibility assesses the Government’s performance against the fiscal mandate and supplementary debt target. The OBR’s assessment is that the public sector net debt as a percentage of GDP will be falling by 2016-17.

Will the Minister confirm that the Government will have more than doubled the national debt between 2010 and 2015, and that this Government will have increased the national debt by more in five years than it increased in the entire 13 years of the Labour Government?

Having brought the country to the brink of bankruptcy and having set the economy ablaze, the Opposition now throw stones at the firefighters. The country will never forget that we had the largest budget deficit when we came to power. We were borrowing £5,000 a second, and that deficit began in 2001, long before the financial crisis. Since then, we have cut it by a quarter, brought back confidence to Britain and created jobs at a record rate.

I congratulate the Government—the Conservative-led coalition—on reducing the deficit, but of course all that is slowing the rate of growth in the debt. When does the Minister think we will get to a budget that is balanced?

My hon. Friend makes a good point about how we must tackle the record national debt that we inherited. It went up threefold during the 13 years of the previous Government’s time in power. When we set out the Budget forecast next week, my hon. Friend will get a good answer.

Businesses in Swansea are telling me that assessing net debt should include an assessment of net assets, and they have written to me and the Chancellor asking that Swansea be considered for superconnectivity status, namely that the Government invest in our broadband capability. Is that something he is willing to look at positively with the businesses involved?

That was very wide of the subject of public sector net debt falling as a share of GDP in 2015-16. The hon. Gentleman needs to do his research and have another go. Go back to the drawing board. We are grateful to him.

Would it ever be a credible policy to borrow more in order to borrow less, or would it simply increase our debt, damage our credit rating and ensure that the country would be in even greater difficulties than it already is thanks to the Labour party?

My hon. Friend makes a good point. If the country were now following the Labour party’s plans, independent assessments show that the country would be borrowing £200 billion more: more debt, more deficit. As we bring the deficit under control we will be able to invest in things such as broadband plans in Swansea and help growth in this country.

Child Poverty

7. What assessment he has made of the effect on child poverty of his changes to the uprating of tax credits and other payments announced in the autumn statement. (147129)

10. What assessment he has made of the effect on child poverty of his changes to the uprating of tax credits and other payments announced in the autumn statement. (147132)

The Government have protected poor and vulnerable groups while undertaking the urgent task of tackling the fiscal deficit. Work remains the best and most immediate way out of poverty, and we have continued to prioritise providing the best possible work incentives for welfare reform and increasing the personal allowance.

The Government’s own impact assessment says that 200,000 more children will be pushed into poverty as a result of the cuts to tax credits and benefits next month. The Children’s Society says that 40% of the children in my constituency now live in poverty. Will the Minister provide an assessment of how many more children in Middlesbrough will be in absolute poverty in 2016 as a result of the Chancellor’s failures, with not enough money for their food, warmth and shelter?

The hon. Gentleman knows that the official measure for child poverty is flawed. It is based on changes in relative income, which has meant, for example, that under Labour child poverty fell by 300,000 during a recession—clearly a nonsense. This Government are focused on the causes of child poverty, such as unemployment. I would have thought that the hon. Gentleman would welcome the fact that more people are employed in Britain today than at any time in our history.

The Institute for Fiscal Studies estimates that the changes that the Government are bringing in will cost a one-earner family with children around £534 from April this year. Will the Minister confirm that figure, and in doing so, will he confirm also that a one-earner family with children where the earner happens to be a millionaire will receive a £40,000 cut in April this year?

What I can confirm to the right hon. Gentleman is that this Government are focused on the causes of poverty, which is what he should be concerned about. I am surprised that he raises this question, because he highlights to his constituents that during the last term of the previous Government youth unemployment in his constituency went up 149%. Under this Government it is down 18%.

Is it not a lamentable fact ignored by Opposition Members that for far too long this country has had too many children growing up in workless households, which means bad outcomes for those children over the longer term? Will my right hon. and hon. Friends redouble their efforts to make the tax system as simple as possible and to create incentives for people to work and set a good example for their children?

My hon. Friend is absolutely right, and that is why the Government have increased the personal allowance, cutting taxes for the low paid, helping 24 million people in the country. In addition, we are introducing universal credit to create the right incentives to get people back into work.

On the subject of the personal allowance, does my hon. Friend agree that that has made a huge difference to a large number of people who are less well-off? In my constituency alone, 38,000 people have benefited.

My hon. Friend is absolutely right. The previous Government abolished the 10p tax rate. This Government have cut taxes for the lowest paid in this country, 24 million people have benefited and 2 million people have been taken out of taxation altogether.

Corporation Tax

8. What plans he has to increase corporation tax payments in the UK by large multinational companies; and if he will make a statement. (147130)

13. What steps he is taking to ensure that international companies pay the appropriate levels of tax on revenues earned in the UK. (147135)

The Government are determined to ensure that multinational companies pay their fair share of tax. The UK is committed to taking multilateral action through the G20 and the OECD to tackle the issues of profit-shifting by multinationals and erosion of the corporate tax base. The OECD presented its initial report on addressing these issues at the G20 meeting in Moscow last month and will present a comprehensive action plan to tackle them at the G20 in July this year.

Even if the OECD produces a decent action plan, nothing will happen before September, yet Britain is responsible for some of the biggest tax havens in the world: Barbados, Bermuda and the British Virgin Islands received more foreign direct investment than Germany and Japan in 2010. When did the Minister last talk to the Foreign Secretary about what he could do about these tax havens?

It is worth pointing out that these places are not simply colonies in which we can direct orders; they have a degree of independence. We are working with other countries at the G20 and the G8 and through the OECD to ensure that we have a modernised tax system, which includes addressing jurisdictions where there is a lack of transparency.

Does the Minister agree with me on this very simple principle: companies should expect to be liable for appropriate tax in the UK on goods and services paid for and used by people and organisations based in the UK?

The point I would make is that we want to have an international tax system under which economic activity is taxed where that economic activity takes place. The fact is that the international rules have not moved with the times, but they need to do so, and I am delighted that the Chancellor of the Exchequer is leading the way in this debate.

Many of my constituents—particularly younger constituents and Church groups—are very interested in this agenda and are closely following what the Government are hoping to achieve this year. Is the Minister optimistic that our international partners will respond positively to this agenda and we can make progress on it?

It is fair to say that we are making progress so far. My right hon. Friend the Chancellor has worked very closely with his German and French counterparts in pushing forward this agenda, and I hope we will make significant progress over the months ahead.

Although I wish the Minister success in achieving the international objectives, does he agree that dismantling the ability of the UK tax authorities to deliver on that international agenda is not the way to go about it, and with 2,000 staff at Her Majesty’s Revenue and Customs already having been sacked, does he not worry that we will be unable to deliver on it?

In areas of enforcement and compliance, we are investing more money in HMRC. Staff numbers will increase, and that contrasts favourably with the record of the previous Government. The fact is that HMRC’s ability to get in more money is increasing year after year.

Alcohol and Fuel Duty

9. What recent assessment he has made of the effect of alcohol duty and fuel duty on the cost of living and household budgets. (147131)

As a result of Government actions on fuel duty, from April average pump prices will be 13p per litre lower than if we had implemented the previous Government’s plan to squeeze motorists, and will remain at least 10p per litre lower over the remainder of the Parliament, giving real help to millions of families and small businesses.

I certainly welcome the efforts that the coalition Government have already made, but with the price of fuel now once again nudging £1.50 per litre in some places, does my right hon. Friend recognise the anxiety that the continuing prospect of rises in fuel duty causes people in rural parts of Wiltshire, as much as in the highlands of Scotland, who find themselves with little alternative to running a car?

As my hon. Friend knows, as a fellow rural MP I fully understand the pressures he describes, which is why we have taken the action I set out in my previous answer. He will also know that the pressures on the public finances remain substantial. I would remind him and the House that 25 million working people in this country will see the largest ever increase in their income tax personal allowance, meaning that the income tax cuts delivered by this Government will amount to £50 a month from April.

One of the biggest hits on petrol prices has been the VAT increase. The hon. Member for Chippenham (Duncan Hames) is absolutely right that there are now record prices at the pumps. Will the Minister consider temporarily lowering the VAT rate, to help hard-working families across the country?

With all respect to the hon. Gentleman, I am not sure that he has reflected upon the substantial fuel duty escalator that was baked into the public finances when his party was in office. We have dealt with those increases on a case-by-case basis and reduced fuel duty by a penny. I think that is the right action to support motorists, families and small businesses alike.

16. Does my right hon. Friend share my concern that minimum unit pricing for alcohol could hit responsible drinkers from some of the most deprived families? (147138)

But surely the Minister cannot run away from the fact that the largest single increase in fuel prices at the pumps was the VAT increase. Also, over the past two weeks the weakening pound has driven up prices at the pumps. That needs to be seriously considered.

I do not run away from any of the decisions the Government have made, and the hon. Gentleman should not run away from the fact that the ratchet on fuel prices planned by his party in the last Parliament, which was baked into the public finances, would have dwarfed the increase to which he refers.

Turning to the other escalator, the nonsensical beer duty escalator, I can give my right hon. Friend good news: there are now around 1,000 breweries in this country, the highest number for 70 years, because of the explosion in micro-breweries due to fairer and lower beer duty. Now that the Government are rightly going to tackle overcharging by the pub companies, which will allow more access to market for the wonderful micro-breweries, may we also have some joined-up thinking with the abolition in the Budget of the beer duty escalator, which simply does not make sense?

I certainly share my hon. Friend’s admiration for micro-breweries: one in my constituency has recently produced a beer called Ginger Rodent, which sold out in its first run. I look forward to more sales when it is in the House of Commons bar in June. As for the rest of his question, I take it as a Budget representation.

Inflation: Average Earnings

11. What recent estimate he has made of the extent to which the rate of increase of average earnings has kept in line with the rate of consumer price inflation. (147133)

The average gross weekly earnings of full-time employees rose by 2.8% between the last quarter of 2011 and the last quarter of 2012, while consumer prices rose by 2.7%. As a result of the increases in the personal tax allowance and rising employment, average household disposable income has increased by 2.8% more than inflation.

Clearly the Chancellor has no understanding of what it is like to get by on a low income when increases in prices such as VAT mean debt and hardship for many families. Equally, last week the Office for Budget Responsibility confirmed that the Prime Minister has no understanding of his economic policies either. Is that why the Chancellor is implementing a tax cut for millionaires—because he does not understand real life or economics?

If the hon. Lady had a grasp of economics, she would understand the need to take people out of taxation, which is what we have done through the increase in the personal allowance. In fact, that increase affects the lowest paid most of all and is equivalent to a pay increase of 4.5% since the general election. A higher personal allowance is a better policy than the shadow Chancellor’s plan to introduce the 10p rate, which the Financial Times described as “a pretty basic howler”.

The shadow Chancellor is a very gracious chap and, I am sure, would wish to commend the Government for taking 25 million people out of tax by the simple measure of increasing the personal allowance. Can my right hon. Friend share with the House what that means for an individual’s annual budget?

Yes. By next month it will be worth £600 a year for every basic rate taxpayer, which is an enormous increase. For someone on median earnings, it is equivalent to a pay rise of 4.5%. I would have thought that the shadow Chancellor, who professes to be interested in helping the low-paid, would endorse the policy.

Income Tax

12. What estimate he has made of what the annual value of his planned reduction in the additional rate of income tax to 45% would be to a person earning £1 million a year. (147134)

Owing to the significant behavioural responses to changes in marginal tax rates at high levels of income, the annual value of changing the additional rate of tax would not reflect the actual Exchequer impacts of the change. HMRC’s report “The Exchequer effects of the 50 per cent additional rate of income tax”, which was published alongside the 2012 Budget, set out that behavioural response in detail.

Well, that was very clear, Mr Speaker. The answer, of course, is £40,000 a year. Why is a £40,000 a year tax cut for millionaires this Government’s priority?

The purpose of income tax is to raise money to fund public services. The 50p rate of income tax did not raise money to fund public services, so we have got rid of it.

On the subject of priorities, how much does the Exchequer believe that cutting the higher rate of tax will cost compared with the cost of raising the personal allowance, which has benefited thousands of my constituents and millions of people across the country?

The costing for the cutting of the additional rate, according to Her Majesty’s Revenue and Customs and signed off by the Office for Budget Responsibility, was £100 million. The cost of raising the personal allowance is about £9 billion, and that is where our priorities lie.

17. Instead of spending £3 billion on cutting the 50p rate for the richest, why not put the money towards 100,000 social rented homes of one and two bedrooms to make the coalition Government’s bedroom tax work? (147139)

This figure of £3 billion that is repeated time and again is simply inaccurate. It makes no assumption for behavioural effects whatsoever, and this was never the position of the Labour party. The fact is that the cost is £100 million, recouped several times over by other measures contained in the last Budget that are getting more money out of the wealthy.

Tax Avoidance

The Government are fully committed to tackling tax avoidance, taking all necessary steps to protect the Exchequer. Since 2010, the Government have introduced 26 changes to the law to close loopholes and tighten our legislation against tax avoidance. We are introducing a general anti-abuse rule in this year’s Finance Bill to tackle abusive avoidance schemes, and we will be consulting on measures to address high-risk promoters of avoidance schemes.

I am grateful to my hon. Friend for that answer. One of the drivers of these aggressive tax avoidance schemes has been the cottage industry that has grown up among those who seek, for their own financial gain, to persuade those who want to pay their taxes to enter such schemes. What steps are the Government taking to deal with the promoters of these aggressive tax avoidance schemes?

My hon. and learned Friend is absolutely right to raise this issue, which the Government have focused on extensively in recent months. We have consulted on what we can do in this area, and I hope that we will be able to report back on that shortly. We have also strengthened the disclosure of tax avoidance schemes regime, making it increasingly difficult for people to peddle these artificial, contrived schemes that involve people not paying their fair share. We do not think that that is right and we are doing something about it.

Two years ago Christine Lagarde gave the Treasury 6,000 names of UK nationals using Swiss bank HSBC to avoid paying tax. Two years later, one of them has been convicted. Is the case closed on the other 5,999, and if so, why?

I am not going to get drawn into individual cases, but I will say that under this Government the number of prosecutions will increase fivefold. We are giving additional resources to HMRC to help to deal with prosecutions, and we have strengthened its offshore team. Our record on dealing with tax evasion—dealing with those who have cheated the system—is one of which we are proud, and it compares very favourably with the record that we inherited.

Private equity is an important source of investment for expanding businesses, but when they over-leverage it can lead to disasters such as that with Castlebeck. It can also lead to protracted negotiations with the Revenue over the deductability of interest and an erosion of the tax base. Will my hon. Friend consider the German approach of limiting the level of interest that can be deductible in any tax year as a proportion of a company’s profit—the so-called bright line?

We did look at interest deductibility when we first came into office. However, in the corporate tax road map that we set out in 2010, we took the view that we were not going to change the rules fundamentally with regard to interest deductibility. What we have done, of course, is favour equity more by cutting corporation tax. My hon. Friend also raises wider issues about private equity and leverage that the Banking Commission is considering.

National Infrastructure Plan

We have made significant progress in implementing the national infrastructure plan and published an update in December’s autumn statement alongside the latest version of the infrastructure pipeline. A further detailed delivery update on the top 40 infrastructure projects will be published alongside the Budget.

Why did the Government cut infrastructure investment by £12.8 billion more than the plans they inherited?

The hon. Gentleman will know that in the 2010 spending review and the 2011 and 2012 autumn statements, we increased spending on infrastructure compared with the plans for capital spending that we inherited from the previous Government. Consequently, investment in infrastructure in this country is higher as a share of GDP over this Parliament than it was on average during the previous Government’s time in office.

I am extremely grateful for the hon. Gentleman’s generosity, but I am afraid we are not going to take Question 19. We are moving on. [Hon. Members: “Shame!”] Oh, go on, then. I am not going to ruin the hon. Gentleman’s day.

Budgets 2010 and 2011

19. What assessment he has made of the effect of measures he announced in the 2010 and 2011 Budgets. (147141)

I am delighted to answer Question 19.

The Budget of June 2010 set out the Government’s plans to reduce the deficit and rebuild the economy. The Government’s strategy since then has provided the foundations for recovery. Market interest rates have fallen to near-record lows. The deficit has been reduced by a quarter over two years. Employment is at record highs and exports of goods to China, India and Brazil have increased by about a third.

The Government set out in 2010-11 some key initiatives in the all-important life science sector: the biomedical catalyst fund, the patent box and tax breaks for start-up companies. This week sees the publication of the catalyst fund’s first annual report, showing that more than £1 billion has been raised in five new early stage funds in the UK, with more than 50 innovative medical projects coming to the NHS. Does that not suggest that we are laying the foundations for a sustainable recovery?

My hon. Friend makes an excellent point and I am sure that the House is delighted to have heard him do so. I know that he has done some superb work with the biotech industry. I met representatives of the BioIndustry Association a few weeks ago and they recognised that the steps we have taken on the patent box and research and development tax credits have put in place a very favourable environment for that industry.

Unfortunately, we certainly do not have time for Question 20 from the hon. Member for North East Somerset (Jacob Rees-Mogg) on article 153(5) of the treaty on the functioning of the European Union, but you never know what topical questions might bring.

Topical Questions

The core purpose of the Treasury is to ensure the stability and prosperity of the economy. I am pleased to announce that I have decided to reappoint Martin Weale as external member to the Monetary Policy Committee. He is a wise and valued member of the committee and I am delighted he has agreed to continue his service.

The spending review will be published on Wednesday 26 June and its spending envelope will be set in next week’s Budget.

Bankers’ bonuses are up £15 billion, executive boardroom pay is up by 27%, and the richest 1,000 people in this country have increased their wealth by £155 billion, yet there is still a tax cut on the way for the richest 1%. When is the Chancellor going to do something for the other 99% who are paying the bill to subsidise the lifestyle of his privileged chums?

We are increasing the personal allowance for 24 million people. Bankers’ bonuses were £15 billion a year when the shadow Chancellor was City Minister, but they have come down to just over £1 billion—a dramatic reduction as we now have a more responsible financial sector.

T5. With the whole of the United Kingdom getting behind Southend’s bid to be city of culture in 2017, will my right hon. Friend tell the House what economic benefits such an award would bring? (147152)

My Parliamentary Private Secretary, my hon. Friend the Member for Hastings and Rye (Amber Rudd), has just said in my ear that her constituency is also bidding. I will not take sides, but I know that Southend will put in a very strong bid, as will Hastings. The decision will be announced shortly.

The Chancellor has had plenty of advice over the weekend on how to change his failing economic plan, and it has not all come from me. The former Defence Secretary says that he should cut capital gains tax, the Business Secretary wants a £15 billion housing boost, and even the Home Secretary is making speeches calling for a new growth plan. What is going on? Do Cabinet Ministers not realise that the Budget is in just eight days’ time, or have they lost confidence in the Chancellor of the Exchequer?

What people realise is that the right hon. Gentleman’s prescription of borrowing more as a solution to Britain’s borrowing problems is exactly the same prescription that got the country into this mess in the first place. He is like the snake oil salesman selling his miracle cures when people remember that his medicine almost killed the patient. We are not going to listen to him again.

But it is the Chancellor’s plan that is failing. The Business Secretary said on Monday:

“Well we are already borrowing more”—

[Interruption.] Government Members may cheer behind the Chancellor in public, but they are not cheering in private. An e-mail from the right hon. Member for Wokingham (Mr Redwood) has fallen into my hands. It was sent around within half an hour of the Prime Minister’s speech last Thursday to set out alternative ideas for the Budget from Back Benchers, such as income tax cuts and capital gains tax cuts. He says that “one colleague” says that we should do

“more to help people with childcare costs.”

Just one colleague! It concludes that the Chancellor needs

“to stimulate greater confidence, more enterprise, and to relieve some of the squeeze on the private sector.”

Businesses and families are feeling the squeeze, so why will the Chancellor not act to stimulate the economy and why is it only millionaires who are getting a £3 billion tax cut from him? Is not the truth that his plan is failing? That is why all the Government Members are losing confidence.

I am tempted to say, “Look behind you.” With a week to go until the Budget, is that the best that the shadow Chancellor can do? He has produced an e-mail from Conservative Back Benchers who are perfectly entitled to ask for things in the Budget. In this party, we are perfectly prepared for people to express an opinion and to listen to the views of our colleagues, unlike him and the operation that he runs. He is the face of Labour’s economic failure. As long as he remains as shadow Chancellor, it is a great thing for my party.

Given that an improved export performance will be crucial to Britain’s economic success, may I share with the Chancellor the good news that in its fourth quarter economic review, the Northamptonshire chamber of commerce, which after all represents middle England at its best, reported that 41% of its manufacturing members reported increased exports and that 76% of service sector companies reported higher figures?

That is excellent news. I congratulate the businesses in my hon. Friend’s constituency and the people who work for them on the hard work that they are putting in. It is essential that Britain connects itself better to the fast-growing parts of our world. It is good news that exports to China, India, Brazil and the like are up by two thirds under this Government, but we still have much more to do in that space. That is why, in December’s autumn statement, we put more money into UK Trade & Investment, which will help the businesses in his constituency to get those export orders.

T2. Is it not absurd that the Liberal Democrats, who claim that the mansion tax on homes worth more than £2 million is their policy, are poised to vote against a motion that argues for precisely that? (147149)

I note that the shadow Chancellor did not refer to his opportunistic motion this afternoon, because we would have had a chance to refer to Labour’s record of welfare for the wealthy during their time in office: a lower rate of corporation tax than for the person who cleans the offices of the private equity fund manager; a lower top rate of tax of 45p during Labour’s 13 years in office; loopholes in the stamp duty system; and the 10p tax rate fiasco. We will take no lessons on tax fairness from the Labour party, and we will vote for our amendment that confirms Liberal Democrat support for a mansion tax.

Will my right hon. Friend update the House on what measures the Government are taking to put right the unbelievably poor regulation by the previous Government, and say what the permanent bank levy will do to improve revenues to the Exchequer, over the bank bonus implemented by the previous Government?

We are raising more in bank taxes every year of this Parliament than the previous Government raised in any one year during their time in office. My hon. Friend is right; those revenues help to support public services and deal with the deficit. We also have a better-regulated banking system, and with the arrival in April of the Bank of England’s new role as prudential regulator, and the Financial Services (Banking Reform) Bill currently before Parliament, we are putting right all that went wrong in the banking system.

T3. Did the Business Secretary let the cat out of the bag yesterday? When asked on the “Today” programme whether his call for investment in infrastructure to kick-start the recovery would mean more borrowing, he replied:“Well we are already borrowing more”. (147150)

We are increasing capital spending more than in the plans we inherited from the Labour Government. This Government are spending more on roads than the previous Government did and, of course, the deficit has come down by 25%.

Although article 153(5) of the treaty on the functioning of the European Union may be esoteric to some, it is rather important because it prohibits the European Union from running an incomes policy. It seems to me that the bonus limit is an incomes policy; it is not a power of the European Union and therefore ought to be resisted by the Government by all possible means. Will the Chancellor take it to the European Court of Justice?

I am delighted to answer my hon. Friend’s question. We are looking carefully at the provisions of the treaty and at every aspect of the proposals. We think that this country has a particularly rigorous set of arrangements, and we do not want to see them diluted.

T4. Companies are telling me that with demand at rock bottom and infrastructure projects failing to get away from the starting blocks, they see little incentive for investment in UK industry. When drawing up the Budget, will the Chancellor consider expanding the scope of enhanced capital allowances to cover a broader range of investment, and therefore encourage companies to invest in the UK rather than take their money elsewhere? (147151)

I shall take that as a Budget representation, but it is worth pointing out that at the last autumn statement the annual investment allowance was increased tenfold.

Has my right hon. Friend seen the recent report from Barnardo’s that highlights the reduction in child poverty in some inner-city areas such as inner London? That is because there are significantly more families in work than there were this time last year.

I thank my hon. Friend for that question. Like us, Barnardo’s is interested in reducing child poverty and understands that that is done by creating jobs. The private sector has created 1.2 million jobs over the past two years, which is more than were created during the last 10 years of the previous Government.

T6. Owing to the changes to child benefit for families with a higher-rate earner, as from 7 March, 370,000 parents have opted not to receive child benefit. Will the Chancellor say how many of those 370,000 parents are stay-at-home mums who will lose their national insurance credit to their state pension, which is linked to the receipt of child benefit? Were they advised before they made that decision? (147153)

As far as contributions to the state pension are concerned, the change will have no effect whatsoever on any of those who opt out. The system will not be affected by the change and the hon. Lady can be assured that that is not an issue. I also point out that all households affected by the high income charge on child benefit are in the top 15% to 20% in terms of earnings. It is right for the Government to take some difficult decisions to reduce the deficit.

House building approvals are up by two thirds. Does that reflect the success of the Government’s funding for lending schemes, the Financial Secretary’s successful planning reforms, or the sustained period of record low interest rates?

T7. My weekend surgeries were dominated by constituents facing backdated payment demands from Her Majesty’s Revenue and Customs, despite the fact that they had discharged their responsibilities and had been assured that their tax affairs were in order. Does the Minister think it is right to put people through financial stress and misery because of HMRC mistakes and staff cuts? (147154)

There was an issue regarding end-of-year reconciliation, which is an errant part of the pay-as-you-earn system. When we came into office, 17 million cases needed to be dealt with. I think that backlog is about to be cleared—we have made great progress. We are reforming the PAYE system so that tax will be collected at the right rate at the right time, and much more accurately than in the past.

Does the Chancellor agree that increasing the personal allowance again will mean that a basic rate taxpayer in my constituency will pay £600 less in tax as a result of the measures taken by the Government?

That is already planned and was announced last year. In April, people will be £600 a year —£50 a month—better off. We have also taken 2 million people out of tax altogether, which is a sign of our commitment to those on low incomes and a sign of our commitment to all those who work hard and want to get on.

T8. As the Chancellor puts the finishing touches to the Budget, may I, on behalf of the potteries of Stoke-on-Trent, make another plea for applying the mineralogical processing exemption in the taxation of energy products? That would be a helpful sign that the Government understand the needs of energy intensive sectors. (147155)

I shall take that as a Budget representation. To be fair to the hon. Gentleman, he is always a powerful champion of the ceramics industry in his constituency.

My constituents find it much easier to take out a payday loan than to open a savings account. What steps are the Government taking to make it much more difficult for my constituents to fall into that sort of temptation?

My hon. Friend will know that the Government commissioned an independent report from Bristol university on the high interest lending industry. That report shows severe consumer detriment and we have already taken action. We announced last week that we will be working on advertising content and placement, and we will be giving extra powers to the Financial Conduct Authority to impose fines and to close down firms in the most significant cases. She may have seen that last week the Office of Fair Trading announced it is investigating a number of firms: it has told a number of payday firms that they have 12 weeks to shape up; otherwise it will take severe action.

T9. Financing delays are holding up the Government’s new schools rebuilding programme. What steps is the Minister taking, together with colleagues in the Department for Education, to secure financing for this scheme and to support our construction industry, which is under real pressure at the moment? (147156)

The House will know that the Department for Education has already announced that the first 41 highest priority schools are being funded by direct capital. We will be in a position soon to make a statement about the rest, and we have announced recently additional investment in school places to expand school buildings in areas under pressure. All that adds up to an £18 billion investment programme in schools over the course of this Parliament, which I think is a credit to the Government.

Does my right hon. Friend agree that infrastructure projects such as the Mersey Gateway bridge, the northern rail hub and High Speed 2 are good news for my constituents, good news for greater Cheshire, and good news for the north of England as a whole?

I absolutely agree with my constituency neighbour. The Mersey Gateway bridge, which has been talked about for many years, has now got the go-ahead. The northern hub, which MPs from all parties and on both sides of the Pennines have been calling for, is now funded and will be of particular benefit in the Greater Manchester area. High Speed 2 is controversial, but nevertheless will connect the biggest cities of our country and help reduce the north-south divide in our economy. One piece of good news in our economy recently has been the growth of private sector jobs in the north of England.

T10. Has the Chancellor of the Exchequer managed to overcome the militant tendency within the Cabinet to allow him fully to implement the recommendations of the Heseltine review on growth and localism? (147157)

We will set out next week our response to the Heseltine review. Michael Heseltine has set out a compelling vision of how we can operate as a more decentralised country and empower our great cities. I was with him in Birmingham just the other day, with the Labour leader of Birmingham council, working on how Birmingham could set out a report and act as a test case for other cities.

In the past, Chancellors have had to resign if Budgets are leaked. Given what happened last year, will the Chief Secretary tell the House what measures he has put in place to ensure it does not happen again?

Of course I want to ensure that the House of Commons is the first to hear the Budget, just as it was the first to hear the appointment of the new Governor of the Bank of England.

Order. I am sorry to disappoint colleagues, but demand always exceeds supply at Treasury questions.

National Commonwealth Military Day

Motion for leave to bring in a Bill (Standing Order No. 23)

I beg to move,

That leave be given to bring in a Bill to introduce a national day to raise awareness of the contribution of Commonwealth countries in military action of Great Britain and the Overseas Territories; and for connected purposes.

Thank you, Mr Speaker, for giving me this opportunity to raise an important issue for many Members of the House. I am grateful for the support I have received and hope to gain more support as I push this project forward.

Britain owes a debt of gratitude to the Commonwealth countries and those who have contributed to its military history. For centuries, that contribution by men and women, young and old, has shaped the nature of the British armed forces and their achievements. Of course, I am moving this motion on Commonwealth week, and I am delighted to note all the hard work that goes into this celebration, but I would like to push it forward with the formation of a new day. Sometimes unwittingly, these achievements, and the debt that the nation owes, are forgotten. History is written by the victors, they say, yet many acts of bravery have disappeared from our country’s consciousness, which, I believe, does a disservice to the memories of those who have served and protected our island nation.

The Government need to take more active steps to ensure that we recognise and reward those contributions, just as we honour those who are born on these shores. That is why I propose to create a day to commemorate contributions made by members of the Commonwealth in military action. It would be a day to consider not just the contribution to the world wars, but to look further back, a day for schools to encourage and teach alternative accounts of war and a chance for us to draw together communities whose families fought for Britain and countries across the globe that still contribute to our military and civilian life.

This national Commonwealth military day should include three distinct commitments. First, I hope for a ceremony to commemorate these contributions, although we should not limit our recognition to the two world wars. Secondly, I would like to encourage schools to take a view of these alternative historical viewpoints and to take the time to reposition an understanding of how modern Britain has come to take the shape it has. Thirdly, I would like the Ministry of Defence to review cases where heroism has been overlooked in a manner not befitting the contributions made. To demonstrate the importance of this issue, I shall draw the House’s attention to examples of bravery and valour that are, sadly, less known than they should be.

The first figure, who now lies in St Mary’s cemetery in Kensal Green, was not a soldier or sailor, did not fight with musket or blade and was not a military strategist or a straight shooter, but her contribution to the Crimean war came from a compulsion to aid the wounded and sick in the face of discrimination. Mary Seacole is often known as “the other Florence Nightingale”, but her dogged determination to care for British troops overcame the prejudice ingrained in our society at the time. Rebuffed in her attempts to join the nursing unit that had travelled to the Crimea—now part of Ukraine—and to gain charity funds, she travelled to the battlefields and financed her project herself. Her dedication to saving lives gained her prominence in contemporary London, but she was never formally recognised for her contribution and has only found recognition in recent years. The Mary Seacole award is an NHS award fund for specific health care projects that aim to improve the health outcomes of people from black and minority ethnic communities, but her story is less known outside health care professionals.

The second example concerns the battle of Saragarhi in 1897. This is a relevant example of a contribution made and swiftly forgotten. On 12 September, 21 members of the 36th Sikhs regiment were guarding the signalling post of Saragarhi between Fort Gulistan and Fort Lockhart when they were besieged by some 10,000 Afghan tribesmen. Saragarhi is recognised by military historians as one of the great last stands, with all 21 men choosing to fight to the death. When news of the battle reached this House, so extraordinary was the tale and so valiant the actions that the Members in this Chamber rose to their feet and gave a standing ovation. All the men were posthumously awarded the Indian Order of Merit, first class, which at the time was the highest gallantry award given to Indian troops. It was not until 1911 that Indian troops qualified for the Victoria Cross.

More than 4 million men and women from Britain’s colonies volunteered in the first and second world wars. For many Members, this is an issue of great pride. Indeed, the grandfather of my hon. Friend the Member for Wolverhampton South West (Paul Uppal), Jawala Singh Khela, fought in the still relevant theatre of Basra, in Mesopotamia, in the first world war.

As many of my hon. Friends will know, some of my main interests include British military history, football, beer and business. It is therefore of great significance to me to bring to the House’s attention the story of Walter Tull. I fully expect his name to come to further prominence this year, as a campaign for recognition of his achievements is taking place. Although he was born in England to an English mother, his father was from Barbados. As a footballer, he suffered considerable prejudice for his heritage, playing for Tottenham Hotspur and Northampton Town, before enlisting in the Army at the outbreak of world war one. Despite the ingrained prejudice that dictated that a man could become an officer only if he was of entirely European descent, Walter Tull became just that.

Walter Tull fought and died on the western front in 1918, during the last German offensive. He was recommended for the military cross for his gallantry and coolness under fire, but the medal was never awarded. Ninety-five years on from his death, he has become the unlikely subject of a new play by Michael Morpurgo, author of “War Horse”, and there is a petition for him to be finally awarded the recognition he deserves. To make the argument to review Walter Tull’s case all the more compelling, there is now even an ale brewed in his name by a Northampton brewery.

My initial interest in this issue came many years ago, when I visited the largely forgotten western front battlefields of 1915 at Loos and Neuve-Chapelle with the late, great military historian Professor Richard Holmes. Prime Minister Harold Macmillan fought and was wounded in the arm at the battle of Loos. Neuve-Chapelle was one of the first organised attacks, in which the Indian Army played a significant part. Today there stands the magnificent and imposing Indian memorial, dedicated to the 4,500 men killed in action and the hundreds of prisoners of war who ended their days in German prisoner of war camps, down coal mines a long way from home. Although the Commonwealth War Graves Commission does a great job maintaining the Indian memorial, it receives very few visitors, which is a great shame.

These are just a few examples of the phenomenal contributions made to the Britain Isles. I sincerely hope that these lesser known stories will allow us to reflect on the histories that are less well remembered. To better remember how we became the nation we are today, it is essential to look at the nation we once were. That is why I believe we should have a day to commemorate the contribution of Commonwealth countries to British military campaigns.

Question put and agreed to.


That Graham Evans, Paul Uppal, Rebecca Harris, Richard Harrington, Andrew Rosindell, Julian Smith, Keith Vaz, Seema Malhotra, Valerie Vaz, Mr Pat McFadden, Mr Virendra Sharma and Christopher Pincher present the Bill.

Graham Evans accordingly presented the Bill.

Bill read the First time; to be read a Second time on Friday 26 April, and to be printed (Bill 147).

Opposition Day

[19th Allotted Day]

Tax Fairness

I beg to move,

That this House believes that a mansion tax on properties worth over £2 million, to fund a tax cut for millions of people on middle and low incomes, should be part of a fair tax system; and calls on the Government to bring forward proposals for such a tax at the earliest opportunity.

Let us consider the contrast that now exists as a result of Government decisions. Those who are on low and middle incomes—that is, the vast majority of the British public—have seen their tax credits cut, their child benefits squeezed, their cost of living rise as a result of higher VAT and their wages fall in real terms. However, the richest 1%, including the lucky few who earn £1 million a year, will see an average tax cut of £100,000 in four weeks’ time, and banking executives will not have to pay that annoying bonus tax, all thanks to the Chancellor’s generosity. This is a tale of two societies, with hard-working earners on low and middle incomes paying for the Government’s failure to get the economy growing while the richest elite are being rewarded by the Chancellor with a tax cut worth nearly four times the average annual salary.

Is it not also a tale of two sides of the House? Will the hon. Gentleman explain why his speech today has proved so popular with Labour Members?

The hon. Gentleman really needs to focus on the issue at hand. If he is standing up for the millionaires’ tax cut, he should simply say so. It will take effect in about three weeks’ time, and a number of his constituents will be absolutely astonished that he has voted for an average £100,000 tax cut for millionaires while they have lost their tax credits, found themselves paying more and seen a decline in the quality of public services.

I am sure that the massed ranks of the shadow Minister’s colleagues behind him today would like to know whether he will pledge to increase the top rate of tax to 50p in his manifesto.

We certainly voted against the tax cut, and if we were in government now, we would not be cutting that 50p rate to 45p in April. Heaven only knows what other horrors the Government have in store over the next two years. We do not know what kind of situation we are going to inherit in regard to the deficit and to borrowing, so it is impossible to predict the tax situation that we will be faced with, if and when we inherit that position at the next general election.

I want to make some progress. I will give way in a moment.

The divide between the richest and the least well off is getting broader, not narrower, and the situation is getting worse. The Government are cutting taxes for one group this year—the very richest in society—with 13,000 people earning £1 million a year getting a tax cut. That is astonishing. Could any other policy better typify the twisted logic of trickle-down economics than that one?

I welcome the mansion tax as a step towards equality, but why will the Opposition not go further and tackle the absurdity of our council tax rates still being based on 1991 rates? A house valued at £1 million in 1991 pays only 0.3% of its worth, while a house valued at £40,000 pays 2.4%, which is eight times more. Does the hon. Gentleman agree that that is unfair and should be tackled?

It is important to listen to the Liberal Democrats’ proposal for a mansion tax. They believe that £2 billion could be raised in that way from properties worth £2 million or more to help those on low and middle incomes. In our view, any such revenue should fund the reintroduction of a 10p starting rate of income tax.

I would say to hon. Members, and particularly to Conservative Members who are struggling with the state of the current economic policy, that there are independent authorities and budget watchdogs to correct them when they wrongly assert that growth will not be affected by the cuts and the tax rises and that they are paying down the national debt, but they cannot pull the wool over the eyes of the public, who know what fairness is and who know that the choices made so far have been deeply unfair.

Does my hon. Friend recall that it was the Labour Government who introduced the 10p tax? Does he also think that it would help those in poverty, as well as motorists and the building industry, if there were a cut in VAT?

That is our view. We want to do more to help those on lower and middle incomes, and to ask those privileged and wealthy individuals in society—particularly if they have a property worth £2 million or more—to make a fair contribution. The debate today presents an opportunity and a challenge to Government Members to do the right thing and to back what some of them profess to believe in.

Let me remind Members what our motion says. It asks the House to resolve

“that a mansion tax on properties worth over £2 million, to fund a tax cut for millions of people on middle and low incomes, should be part of a fair tax system; and calls on the Government to bring forward proposals for such a tax at the earliest opportunity.”

That is the extent of the motion. It is very simple and straightforward. Liberal Democrats who are in the Chamber today—for some are actually present—have repeatedly claimed to back a mansion tax. After going along with the Chancellor’s tax cut for millionaires, a failing economic plan, a VAT rise and a trebling of tuition fees, they finally have a chance to vote for something that was in their manifesto.

Does the hon. Gentleman not accept that when they were in government, Labour Members opposed our proposal for a mansion tax? It is all very well for them to come out in support of it in opposition, but they never did so in government.

I shall put to one side the fact that the Liberal Democrats said one thing in opposition—about, for example, tuition fees—and have done completely the opposite in government. The hon. Gentleman should know that circumstances are now getting worse, especially given the millionaires’ tax cut which will take effect in April. We must do something to revive the fairness of the tax system, and that is why I think it important for the Liberal Democrats to stick to their 2010 manifesto pledge to introduce

“a Mansion Tax at a rate of 1 per cent on properties worth over £2 million, paid on the value of the property above that level.”

The hon. Gentleman speaks of fairness. The mansion tax that he proposes would be profoundly unfair on a great many of my constituents who have done nothing more than live in the same house for several decades in an area which, in terms of its property prices, has changed unrecognisably. That applies to many parts of London. I am amazed that London Labour Members do not make similar points. What the hon. Gentleman proposes is akin to a tax on living in London.

If the hon. Lady thinks that everyone in London lives in a £2 million property, she must be almost as out of touch as her party’s Chancellor of the Exchequer. Of course there are ways of introducing a mansion tax that could take account of the specific circumstances in which people are asset-rich and cash-poor, but there would probably be very few such cases. The Liberal Democrats have thought very carefully about that particular proposition.

The public constantly tell us that they hate the infantile, Punch and Judy nature of politics. However, I read in today’s briefing paper from the Liberal Democrats that they will not back us because we have copied them. Is that not exactly the kind of behaviour that turns the public off politics?

My hon. Friend is entirely right. We cannot win. When we oppose the policies advocated by the Liberal Democrats, we are attacked, and when we support those policies, they still attack us. It is difficult to know what to do—but I do know that honour and integrity matter to the Liberal Democrats, which is why I still think that they should join us in the Aye Lobby in a few hours’ time. After all, on 17 February, when asked whether the Liberal Democrats would support this proposition, the Business Secretary said:

“It depends entirely how they phrase it. If it is purely a statement of support for the principle of a mansion tax, I’m sure my colleagues would want to support it.”

We look forward to seeing them in the Lobby.

I am waiting to hear the shadow Minister mention that this Government have taken £2.2 million of the lowest earners out of tax altogether. Does Labour’s support for a mansion tax signal its return to high-tax policies, and a end to the new Labour project so admirably led by Tony Blair and Peter Mandelson, which transformed Labour into an electable party? Are we now seeing signs of a return to the hard left, high-taxing Labour party of the past?

No. The hon. Gentleman is in a coalition with partners, whom he no doubt does not regard as hard lefties, who are advocating the very policy that we recommend in our motion. We took the advice of the Business Secretary, a Liberal Democrat, who said “Table a very simple motion, and we will support it.” According to any objective measure, even the hon. Gentleman can see that we have held back from party-political rhetoric. The motion is very plain and simple, as requested. We have tried to find some common ground. If those 57 Members of Parliament—and perhaps even some Conservatives; who knows?—were to join us in the Lobby tonight, that would make the mansion tax a reality.

We are minded to support wealth taxes, and we therefore welcome the motion, but it is a bit thin on detail. Can the shadow Minister reassure me that farmers will not be dragged into the new tax because of the value of their land, and not necessarily because of the value of their property?

That is an important point. I am glad that we have the hon. Gentleman’s support on this issue. Obviously there is a difference between residential and corporate arrangements, but our motion says that we want the Treasury to bring forward proposals at the earliest possible opportunity. We have seen the proposition set out by the Liberal Democrats and used it as the basis for our motion, but let us see what further options can be drawn together. We think that it would be a good idea, for example, for the Chancellor to commission the Office for Budget Responsibility to present detailed suggestions of ways in which the arrangements might work.

Will the shadow Minister remind the House exactly what the top rate of income tax was throughout most of the last Labour Government, and give us some insight into why it was at that level?

After the global financial crisis, we decided to introduce a 50p top rate of income tax so that those earning £150,000 and above would make a fairer contribution to society as a whole. Those people are the wealthiest 1% in society. How astonishing—how absolutely breathtaking—that in last year’s omnishambles of a Budget, the present Chancellor of the Exchequer decided to go for the right-wing trickle-down approach and cut the 50p rate to 45p. I hope that that decision will be reversed in the forthcoming Budget, in respect of which I take it that the hon. Gentleman’s intervention constituted a representation to the Chancellor.

Will the shadow Minister remind the House how much was lost to the Treasury during the period of the 50p tax rate, and does he accept that 100% of 45% is more than 50% of 50%?

I am not sure about the hon. Lady’s maths, but we are still within the period of the 50p rate. Of course we want to see the details of what has been happening. However, while the Conservatives have the notion that for those who are very wealthy, the higher tax rates are a deterrent and create avoidance, they do not say the same about the poorest and the middle-income families in the rest of the country. They can pay VAT at 20%; they can pay higher taxes. The hon. Lady takes a view that is taken by so many Conservatives. There is one law for those who are very wealthy, but everyone else must suffer because of the Conservatives’ failure on revenue and borrowing.

Does my hon. Friend not find it strange that the Government do not seem to understand that taxes are an element of economic policy that can be adjusted in line with economic circumstances? During the first period of the Labour Government, the prevailing circumstances meant that there was no case or need for taxes to be increased, by means of a mansion tax or by any other means. When the need appeared after the economic collapse, compounded by the financial crisis, it became clear that we had to do something, and of course the Government did. The trouble with this Government is that they think policies need not to be adjusted in line with circumstances, but they do need adjusting. Does my hon. Friend not agree with that?

I agree. It is instructive to observe the different choices that the different parties are making on this issue. The Conservatives choose to cut taxes for the richest—the millionaires in society—and to increase everyone else’s taxes. The Liberal Democrats have said that they believe in a mansion tax. Indeed, a fortnight ago the Liberal Democrat leader, the Deputy Prime Minister, said:

“Victor Hugo observed that it is near impossible to resist an idea once its time has come. Last week, he was again proved right as calls for a mansion tax, first proposed by the Liberal Democrats in 2009, gathered new momentum…I offer certainty: the mansion tax, or a version of it, will happen…The Conservatives and opponents of fairer taxes have a choice. They can dig their heels in and remain stuck in the past. Or they can join with the Liberal Democrats and the chorus of voices seeking to make our tax system fair.”

Well, here we are today. What more can we do? The issue is on the table, ready for that momentum to make it happen, so how can the Liberal Democrats resist that idea whose time has come?

Is the shadow Minister going to acknowledge measures such as the raising of the tax threshold, the huge cut in pension tax relief and the huge rise in capital gains tax which have taken place under this Government? In a debate entitled “Tax Fairness” is his proposal really the only measure that his party could come up with?

The mansion tax is not our only measure, but is an important one and we think it is necessary. I had thought that the hon. Gentleman supported a mansion tax. It is there on the table and it cannot be put in simpler terms—it is a one-line motion.

Is there not a contrast between the opposition of the Tories, in particular, to a mansion tax and their wholehearted enthusiasm for a bedroom tax? Does that not show the class divide on their side?

Absolutely, and I think that the contrast between the political parties is becoming clear. Let us contrast the Government’s approach where they feel they can get away with levying higher and more punitive costs—the bedroom tax being a classic example—with the enormous windfall that those earning £1 million a year will be getting from the cut to the top rate of income tax in only a few weeks’ time. It is grotesque.

My hon. Friend may be aware of current estimates that 60% of high-value properties in central London go to overseas buyers, and Conservative MPs, when they are being thoughtful, recognise that that is a serious problem. So he is right to look at the issue of high-value property taxes and getting a balance. Does he agree that there is scope to ensure that the small minority of people who have lived for a long time in areas with escalating property values and who are asset-rich but income-poor can be completely protected within a scheme such as he outlines?

It is entirely possible to design this scheme in a way that deals with those exceptional circumstances—the Liberal Democrats have said so. It is an important question that has to be addressed, and the Deputy Prime Minister answered it in his “Call Clegg” radio slot on London’s Biggest Conversation, which I know is becoming a popular, regular and welcome fixture in the media diary. He said that individuals in such circumstances might be able to defer payments until the house was sold or to “leverage” the value of the property by remortgaging. I am not sure that that strategy provides the complete solution to the conundrum, but I do think that those in the Treasury should turn their minds to how to tackle these rare circumstances. That is why our motion calls on the Government to bring forward proposals for us to consider in more detail.

I have been listening carefully to what the hon. Gentleman has said so far. He seems to have two tax policies that are not yet full commitments, one of which comes from a failed previous Government who brought us to the edge of economic collapse and the other of which comes from the Liberal Democrats. Is that really a great recipe for success on economic policy?

I do not think the hon. Gentleman should be so partisan; he should look at the issues on their merits, as we have tried to do in our motion. We have stripped out all that party political rhetoric and put clearly on the table the proposition, “This House supports the principle of a mansion tax.”

We urge all Members, including the hon. Gentleman to whom I am about to give way, to support that proposition.

Is the hon. Gentleman advocating that a widow with little income who is living in her matrimonial home and is confronted with a £16,000 tax bill take out an equity release scheme mortgage in order to pay it?

That was one of the solutions that the Deputy Prime Minister suggested. I think it is entirely possible to find solutions to deal with those rare circumstances. However, I ask the hon. Gentleman: what is he saying to all of his constituents who, like mine, face having to move out of their properties because of the bedroom tax that his Government are introducing in a few weeks’ time? Many of those people are probably still not aware what charge is going to hit them when the change to housing benefit comes in. He is expecting great upheaval—people having to move house—at one end of the spectrum but when the Deputy Prime Minister comes up with a particular solution his response is, “Oh no, that is entirely unworkable.” We need to get the Treasury and the Office for Budget Responsibility to think about these things in a detailed way.

We had hoped that Government Members would support the motion, but what does the Government amendment say? I urge hon. Members to pick up their Order Paper, turn to the relevant page and just look at the Government amendment—this pantomime amendment, whose logic is contorted. It proposes to delete the whole proposition of a mansion tax and replace it with a pleading defence of the different views held by different parts of the coalition. It would remove the resolve to back a mansion tax and retreat into a messy fudge as a means—I mix my metaphors—of brushing the whole issue under the carpet. It is an amendment that seeks to face both ways yet go nowhere. It is a push-me, pull-you amendment, and the Government should be deeply embarrassed at the drafting, which of course descends, as we can see, into a general attack on the Opposition.

Liberal Democrats need to grow some courage and stand up for themselves, for once. This measure is not just a bygone pledge from their now notorious 2010 manifesto; the Deputy Prime Minister made it the centrepiece of his leadership in the past few weeks. Kicking off the Eastleigh by-election last month, he called for

“taxes on mansions, tax cuts for millions”.

That is what is in our motion. He said:

“The mansion tax is an idea whose time has come.”

He said that opponents of it should

“join with the Liberal Democrats…seeking to make our tax system fair.”

Indeed, others have joined in that chorus.

On this Sunday’s “The Andrew Marr Show” Lord Ashdown said it would be “weird” if the Liberal Democrats did not vote in favour of the tax. The “Sunday Politics” had an interview with the Lib Dem president, the hon. Member for Westmorland and Lonsdale (Tim Farron), in which an interesting exchange took place. Andrew Neil said:

“It’s a simple motion. Will you vote for it?”

The hon. Gentleman said:

“Well, let’s say, I mean, when all’s said and done, that is pretty much Liberal Democrat policy”.

Andrew Neil then asked:

“Well, what part of that motion do you disagree with?”

The hon. Gentleman said, “None of it.”

Does my hon. Friend agree that the Liberal Democrats are in danger of being highly consistent? Having been against tuition fees they voted for them; having been against a bombshell VAT increase they voted for it; and now they appear to be for a mansion tax but are going to vote against it.

I hope that my hon. Friend is not accusing the Liberal Democrats of consistency in their inconsistency—that would be a step too far.

The hon. Gentleman is talking about courage, so I wonder how far the official Opposition’s courage will go. Some £4.5 trillion is kept by the top 10% of wealthiest households, so the £2 billion that would be raised by a mansion tax, although welcome, is a tiny amount and would hardly bridge the chasm between the super-rich and the poorest. Given that, would the official Opposition support a genuine wealth tax?

I would be very interested to see the hon. Lady’s proposition, but I do not think it is necessary to go for that general approach that she takes. I say that because there are targeted ways in which we could try to build consensus on a property tax for high-value properties over £2 million and then use the revenue to help the vast majority of lower-income and middle-income families. That is the proposition before us today.

It was interesting to hear the remark by the Green Member of Parliament about the wealth tax and being brave. I looked at the list of candidates who stood at Eastleigh, where I thought it would be wide open for a Green to find a way through, and found that the party did not even put up a candidate—what courage!

We digress slightly, but that is an interesting observation. I did not realise that the Green party had fled from that Eastleigh by-election.

Before we leave the subject of the hapless Liberals and consistency, does my hon. Friend agree that they do show consistency in their inconsistency and in their insincerity—that is the only consistency we can identify?

There is time for those sinners to repent, and I hope that in three hours’ time they will re-examine the motion, seriously consider the outrageous stretch in the amendment, stick with their principles and support the motion. I accept that there is a need to flesh out the details of how the mansion tax arrangement would be designed. We need to commission the Treasury and the OBR to work on those particular details.

Some have suggested building on existing property tax systems, although that is not wholly straightforward. In New York City, apparently, a £2 million property owner can pay about £22,000 of property tax, but Lord Oakeshott, who, as we know, is a leading light in the Liberal Democrat firmament, argues against council tax banding as one way of approaching the question. He says:

“If you just put on one or two council tax bands, you can't make the superrich pay their fair share”.

Some Conservative Members, such as the hon. Member for Bognor Regis and Littlehampton (Mr Gibb), complain that a mansion tax is impractical, that it cannot be done and that it would be an administrative nightmare, but I simply refer them to their own Front Benchers. Unbeknown to most Government Members, Her Majesty’s Treasury is, with very little fanfare, actively talking about the viability of an annual charge on high-value residential properties and launched a consultation document last May entitled, “Ensuring the fair taxation of residential property transactions”. It contains a whole chapter about introducing an annual charge, as the Treasury calls it, as part of the regime to tackle the avoidance of tax on high-value residential properties, albeit for properties enveloped in non-natural person terms—in other words, those owned by a company or by partnerships or investment vehicles.

Let me draw the attention of the House to some sections of that Treasury publication, because it suggests that a mansion tax is entirely feasible. On page 8, it states:

“The aim of the new annual charge is both to deter avoidance and to ensure the owners of high value residential property pay their fair share of tax…The annual charge will be introduced in Finance Bill 2013.”

So, the measure is coming in the forthcoming Finance Bill at the other side of the Budget. The document states:

“The interest to which the charge will apply will be the freehold or leasehold interest”

and that the annual charge will be

“applied separately to the freehold (if valued over £2 million) and the leasehold (if valued over £2 million…)”.

It goes on to state that the value of the property interest is proposed to be the value determined on 1 April 2012 and, interestingly—let us remember that the document comes from the Treasury—states:

“Property valuations for the annual charge will be self-assessed by the persons liable to the charge and submitted to HMRC as part of their annual charge tax return. HMRC will have powers to enquire into returns and also to make assessments so that non-compliance can be effectively challenged… Properties will be re-valued every five years…The valuation required will be an assessment of the ‘market value’”.

It even goes on to give a helpful list of four bands of annual charge on properties worth more than £2 million. The Treasury knows in its heart of hearts—I do not know whether it has shared this with hon. Members—that the concept of a mansion tax has some feasibility.

That is tremendously welcome news, because clearly neither of the Government parties will vote for the amendment. I understand that the amendment suggests that the Liberal Democrats are in favour of the mansion tax but will vote against the motion, whereas the Conservatives are definitely against it so will on no account be voting for it. If they are both in favour of the tax, they can just support our motion.