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Finance Bill

Volume 583: debated on Tuesday 1 July 2014

[1st Allocated Day]

Consideration of Bill, as amended in the Public Bill Committee

New Clause 14

Report on the additional rate of income tax

‘(1) The Chancellor of the Exchequer shall, within three months of the passing of this Act, publish a report on the additional rate of income tax.

(2) The report shall set out the impact upon Exchequer receipts of setting the additional rate at 50 per cent in the tax year 2015-16.

(3) The report shall set out the impact of reducing the additional rate for 2013-14 on the amount of income tax paid by—

(a) all people who are liable for the additional rate;

(b) those with taxable incomes of over £250,000 per year; and

(c) those with taxable incomes of over £1,000,000 per year.

(4) The report shall set out the impact of the reduction in the additional rate for 2013-14 on the level of bonuses awarded in April 2013 to employees in the financial sector.”—(Shabana Mahmood.)

Brought up, and read the First time.

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

It is a pleasure to start the Report stage of the Finance Bill, Mr Speaker. We had many good and long debates in the Bill Committee, and I am sure we will continue that trend over the next couple of days.

The new clause, which stands in my name and those of my right hon. and hon. Friends, would require the Chancellor of the Exchequer to publish within three months of the passing of this legislation a report on the additional rate of income tax—the top rate, which was 50p until last year, when it was cut by this Government to 45p. The report we envisage would set out the impact on Exchequer receipts of an additional rate, set at 50p, in the first year of the next Parliament. The Chancellor would also be required to set out the impact of reducing the additional rate for last year, 2013-14, and the amount of income tax paid by all additional rate payers, those with incomes over £250,000 a year and those with incomes over £1 million a year. Finally, the report would set out the impact of the reduction in the additional rate in 2013-14 on the level of bonuses awarded in April 2013 to employees in the financial sector.

Since the coalition Budget of 2012, we have had a number of debates on the Floor of the House and in Public Bill Committee on the Government’s decision to cut the additional rate from 50p to 45p. Indeed, the Minister has referred to such debates being an annual event during the passage of the Finance Bill. Why is it so important that we continue to press the Government on this one decision, made in 2012, after they have refused to listen to all and any attempts to get them to change course? It is because if there is one decision taken by the Government that tells us all we need to know about their priorities and who they stand for, this is it.

The Government who said, “We’re all in it together,” and the Chancellor who promised that he would not balance the books on the backs of the poor, saw fit to give, at a time when ordinary working people were seeing their living standards fall and when the combined impact of tax and benefits changes has left households on average more than £974 a year worse off, an absolutely huge tax cut to the wealthiest in our country. For millionaires, this tax cut is worth an average of £100,000—a vast sum, far out of reach for the majority of working people. So although this may appear to be simply an annual event and part of the House’s debates on the Finance Bill, it is much more than that. This Government made a bad choice—the wrong choice—when they prioritised a tax cut for millionaires while ordinary working people continued to struggle as a result of their decisions, and we will not let them forget it.

How does the hon. Lady explain the fact that income inequality rose under Labour and has fallen under the coalition?

I am pleased that the right hon. Gentleman is here. I recall in the debate in Committee of the whole House that he argued for a further cut in the rate to 40p, citing in evidence the increase in revenues resulting from the cut, but as he should know—I am sure he does—that is a result of bonuses being deferred. I shall return to that point, but I think it tells us all we know about where the Government stand on fairness.

My hon. Friend talks about the amount that may be raised, but rather than having a regular debate across this Chamber about the 50p tax cut and the massive tax cut for millionaires, perhaps the Government could just accept the new clause and bring all the facts before the House?

My hon. Friend makes an excellent point. We do indeed have a regular debate about the facts and figures—I will come to the detailed data on the yield from the 50p rate later—but if the Government accepted our new clause, much of that debate could be put to bed, especially as Her Majesty’s Revenue and Customs now has much more data with which to produce an analysis that is less flawed than the one in 2012.

Our hon. Friend the Member for Edinburgh South (Ian Murray) makes a good point. When the Government abolished the 50p rate, they made great play of studies they said they had done on the revenue raised. Would it not be perfectly acceptable for them to accept the amendment, so that we could see exactly the impact of their unfair tax changes, because they are clearly showing their colours in terms of supporting the wealthiest in our country?

I am grateful to my hon. Friend for that powerful point. As I said, I will explore the details in relation to data and the argument over the yield from the 50p rate, but he is right: we cannot continue to rely on a report produced when the rate had been in place for only one year. The Government should accept the new clause and produce a much more comprehensive analysis.

It was the Labour Government who introduced the 50p rate, which came into effect in 2010-11, a decision made after the financial crisis, as we sought to get the deficit down. When this Government came to power they did not say anything in the coalition agreement about abolishing the 50p rate, but in 2011 the Chancellor said that he would ask HMRC to look at the yields from the 50p rate, which was the warning signal that he was looking to cut it. In 2012, with HMRC’s report “The Exchequer effect of the 50 per cent additional rate of income tax” to back him up, the Chancellor cut the rate to 45p.

Why go through the process of looking at yield and getting HMRC to produce a report? Everyone knew that there were not enough data to come to an accurate view about yield because the rate had not been in place for long enough—a point about which I shall say more later. Well, the Chancellor knew that he needed cover for that deeply ideological decision so he was desperate to claim that a 50p rate raised very little money. If he could stand before the House and say that it raised hardly any money at all, never mind the uncertainty and the incompleteness of the data, he calculated that he could justify giving a tax cut to the richest in our country, knowing that on his watch ordinary people—those on middle and lower incomes—would pay the price for his economic plan, which has failed on the terms that he set for himself when he came to power in 2010.

There are 15,300 people in work in my constituency who earn less than the living wage. They have lost out, as have many others, by £1,600 a year since this Government came to power. To them, accepting the new clause would indicate that the Government recognise that tax changes should be to the benefit of everybody in our society, not just a few. Does my hon. Friend think the Government appreciate that, or can she think of another reason why they will not accept it?

I fear that on previous form the Government will not listen today and accept our new clause. Nothing that has been said in previous debates gives me any confidence that they understand the message that they have sent to my hon. Friend’s constituents, mine and those of Members across the House that a tax cut for the wealthiest is prioritised, while ordinary working people at the lower end of the income scale are worse off.

Does my hon. Friend share my worry that people will think the Government have something to hide, as they are unwilling both to let us see what a 50p rate would raise and to audit party manifestos? Rather than “We’re all in it together,” does it not sound like they are all at it together?

My hon. Friend makes a powerful point. What do the Government have to hide? The data that we seek would not be difficult for HMRC to provide. It has already conducted one analysis and it is not unfeasible for it to conduct a further analysis, this time based on more comprehensive data, which would clear up some of the issues once and for all.

Does my hon. Friend agree that by accepting the new clause, the Government would give weight to their often recited argument that the broadest shoulders should bear the greatest burden? The new clause would put the burden on the shoulders best able to bear it.

The Government have published all the figures and they show that after the tax cut the better-off are paying more, not less.

The right hon. Gentleman is wrong. The Government have published one set of figures from only one year’s data. Much more data are now available for a further, more comprehensive review to be carried out, and the Government should do so. If they have nothing to hide, and if they are confident that they have made the right decision, they should submit that to scrutiny.

Returning to data and yield from the 50p rate, we know from the Government’s own assessment that the cost of cutting the rate from 50p to 45p was more than £3 billion, excluding all behavioural changes. In Treasury terms, £3 billion is a big deal, so how could the tax cut be justified? Well, the Government say that most of that potential £3 billion revenue would effectively be lost as a result of tax avoidance, the so-called behavioural change effect. Having assessed revenue lost as a result of tax avoidance and other behavioural change, the Government go on to say that the cost to the Exchequer of cutting the rate to 45p is only £100 million. So, on the Government’s figures, an additional rate of tax set at 50p would raise only £100 million.

Except that even the HMRC report acknowledges, as does the Institute for Fiscal Studies, that all the analysis and estimates are highly uncertain. The scale of behavioural change is primarily based on an assessment of taxable income elasticity. This is the extent to which taxable income changes when the tax rate changes. The IFS says that there is a margin of error. Staying within the margin of error, one could easily say that, depending on the taxable income elasticity, cutting the rate could cost the Exchequer £700 million or could raise £600 million. That gives us an idea of the range of figures that we are talking about and how uncertain these projections are. The Government were and are well aware of this, so we can conclude that the decision was political and ideological, and was not rooted in certain and exact calculations and comprehensive data.

Let me deal with the point about comprehensive data because uncertainty is not the only thing that was wrong with the Government’s analysis. As I said in response to interventions, the HMRC report was based on only one year’s worth of data—the data relating to 2010-11—which is a significant weakness in itself. The report came too early. Given the history of the introduction of the rate and the Government’s decision to cut it, the reliance on year 1 of the rate being in place further weakens the Government’s argument on the numbers, because we know that incomes were taken earlier to avoid the 50p rate when it came into effect, and as a result incomes in 2010 and 2011 were artificially lower, suggesting a lower yield.

The Government should, at the very least, update the analysis in the light of the more recent data for the years 2011-12 and 2012-13, because HMRC now has available to it records for the two years when the 50p rate was in place and it could update the report that was used for Budget 2012. That would give a much clearer picture to all of us who are relying on other figures and forecasts.

The Government say that the increased yield when the rate was cut to 45p is evidence that a lower rate of tax on that occasion resulted in a larger yield. However, they conveniently forget that just as people shifted income into 2009 and 2010 to avoid the 50p rate when it was introduced, once the Chancellor had said in his 2012 Budget that he would abolish that rate the following year, in 2013, people effectively decided to delay their bonuses and income until the new tax year 2013-14 in order to pay 45p rather than 50p. That is why our new clause requires the Government to consider the impact of the cut in the additional rate on the level of bonuses in particular. We know that income forestalling and deferment both occurred, and the Government cannot ignore the deferment of bonuses when they seek to argue that they made the right decision, and cite increased revenues in support of their argument.

Is it not the case that the very well paid people who got the benefit are a collection of tax swindlers swindling the rest of the taxpayers, and should not everybody in the House be attending to changing the law so that such tax swindling cannot happen in the future?

I am grateful to my right hon. Friend for his intervention. I was about to come to the topic of tax avoidance, which I hope will answer his question.

Another weakness in the Government’s argument is the proposition that behavioural change, or tax avoidance, means it is not worth while maintaining the rate at 50p. This must be the only example of tax avoidance resulting in a huge tax cut, rather than in Government crackdowns to tackle and fight tax avoidance, which they are normally so quick to say they are doing. The Chancellor is on record as saying that he considers tax avoidance to be “morally repugnant”, but in the case of the 50p rate he rewarded a particular form of avoidance with a tax cut. I wonder if that has ever happened for people on middle and lower incomes. I think not.

The message that this Government have sent out is that if people are sufficiently well off to pay for advisers who can tell them how to avoid paying the 50p rate, and are organised enough and can lobby the Government, they are up for a tax cut, but everyone else, sorry, is simply worse off.

Does my hon. Friend agree that the Government also send the message that a tax cut incentivises the wealthy to work harder, but that if everybody else is given benefits that does not work?

My hon. Friend is right.

The Government always tell us how proud they are of their record on tax avoidance, but how much effort did they put into thinking of ways in which they could protect revenue from the 50p rate? The Government have introduced the general anti-abuse rule, the so-called GAAR, which may have helped. They could have thought about a targeted anti-avoidance rule, a so-called TAAR. They could also have looked to HMRC to do more. I understand that no specific resources are allocated within HMRC to protect revenue from the 50p rate. A range of measures could have been taken to protect revenue. Before rushing to abolish the rate, the Government could and should have looked at protecting that revenue first. They were quick enough to publish an analysis saying that on their evidence it was not raising much money because of behavioural change, but their instinct was not to say, “Let’s look at how we might see off that behavioural change.” They did not commission a report or publish anything on that; they jumped straight to cutting it at the earliest opportunity: more evidence that this is an ideological and political choice made because they wanted to prioritise the tax cuts for the richest, while ordinary working people are worse off.

Far from trying to curb tax avoidance, is not the problem that the Govt constantly open up fresh opportunities, such as the shares for rights, which the Institute for Fiscal Studies has called another billion-pound lollipop on the table?

My hon. Friend is absolutely right. We will debate later the issues in relation to tax avoidance and shares for rights.

The hon. Lady accuses the Government of being ideological here. For the avoidance of doubt, were there to be yet another study that showed that the 50p rate failed to raise any substantial sums of money, would the Labour party still go ahead with an increase in the additional rate of income tax from 45p to 50p?

Let us see the report. The Minister has had many opportunities in Finance Bill debates where the Opposition have tabled amendments and new clauses calling for such a report. He has not produced one. I have no confidence that he will go away today and ask his officials at HMRC suddenly to produce a report. If he has such a report in mind, he should accept our new clause, and we can then have that debate. We have said that we will increase the rate to 50p. We believe that that can raise money and will be a good part of a much fairer deficit reduction policy.

The truth is that there was no justification for giving a huge tax cut to the richest in our country. We now know that bonuses are up by 83% for those in the financial sector, while ordinary working people are worse off now and will be worse off in 2015 compared with 2010. Wages will be 5.6% down at the end of this Parliament from what they were at the beginning.

The Government have not ruled out cutting the additional rate back down to 40p. We know that this is the ardent desire of many of their Back Benchers. Perhaps when the Minister replies he could tell the House whether the Government are planning any further cuts. They have ducked the opportunity on previous occasions to confirm that they will not go down from 45p to 40p. It will be good to hear from the Minister whether that is the case. The Government’s priorities are all wrong. Ordinary working people continue to struggle with their finances, and the link between the wealth of the nation and the money in people’s pockets and in their household budgets is broken. This Finance Bill does nothing to change the reality of the lives of millions in our country, yet Government Members want to cut taxes for the richest.

The Labour party now proposes a 50p rate for the additional rate. Is that a permanent measure or a temporary measure to deal with the deficit?

The hon. Gentleman has made that point in previous debates, and I repeat the answer that I gave then. We have said that we would increase the rate to 50p in the next Parliament as we get the deficit down. I could not be clearer than that.

It is the richest in our country who are benefiting the most from the recovery delivered by the Government. The return of economic growth has overwhelmingly benefited the top 1%, as shown by analysis of HMRC figures by the House of Commons Library, which covered the year when GDP growth returned and the top rate of income tax on earnings over £150,000 was reduced. The share of post-tax income of the top 1% of taxpayers—300,000 people—rose from 8.2% in 2012-13 to 9.8% in 2013-14. Yet during the same period, the bottom 90%— 27 million taxpayers—have seen their share of post-tax income fall.

This cut to the 50p rate cannot be justified when the deficit is high and will not be eliminated towards the end of the next Parliament. Labour in government will increase the rate back to 50p to help us to get the deficit down in a fairer way. Just as we have said that we want the Office for Budget Responsibility to have powers to audit manifestos ahead of the next general election, because we believe that that scrutiny will add to public understanding about the choices that are being made—a call the Government only last week rejected—so too we think that a report as envisaged by the new clause would help the public to understand the impact of the top rate of tax so that they can make up their own minds about who is standing up for them and other working people like them.

Let me deal first with an old canard from the Labour Benches that is simply untrue and unfair: the idea that Conservatives welcome tax cuts for the rich, but do not think that tax cuts are appropriate for anybody else. Government Members believe strongly that tax cuts work for everybody, and that is why the Government have given back a lot of tax revenue to people on low pay by taking them out of tax altogether. We have supported and welcomed that, and that is where the missing revenue that Labour worries about is concentrated.

The right hon. Gentleman says that the Government are taking many low-income people out of tax. But he must recognise that by raising value added tax, the least progressive of taxes, which everyone purchasing goods has to pay, regardless of their income, they are increasing the burden on the lowest paid.

VAT is not as regressive as the hon. Lady suggests, because I am pleased to say that important items, such as food and children’s clothes, are VAT exempt, which makes it a little less unpalatable. I agree with her that all tax rises are bad news, but they are a necessity given the large deficit that we inherited, and when some important public services need financing. I also entirely agree with Labour that, given that we have a large deficit and need to spend money on important benefits and public services, we need to get that money from the rich and the better off. They are the people with money, and we have to find the best way to get the money off them.

Why is the right hon. Gentleman so scared of the new clause? All it does is request a report. Surely he supports the idea of having a report on these issues so that we can get to the bottom of the matter.

If I am given a chance to develop my argument, I hope I will satisfy any independent-minded people on the Labour Benches that we already have the evidence. We have had a long-term experiment on this very subject, which satisfies some Conservative Members that the way to get more money off the rich is to set a rate that they are prepared to pay and will stay and pay. If the rate is set too high, they leave. If the rate is set too high, their clever lawyers and accountants find entirely legal ways to pay rather less tax than we would like.

The hon. Member for Birmingham, Ladywood (Shabana Mahmood) did not answer my intervention when I asked her to confirm that the Red Book has made it clear that after the cut in the rate, the amount that the better off and the rich paid went up—of course it did. That is the experience we would expect. The hon. Lady is left trying to say that there are special reasons. I will give her this point: it is probably best to judge these things over a longer period than a year or two. One can get odd variations, which is why I want to give the evidence to the House that it has clearly forgotten, which relates to the big reductions in top rate tax that were put through in the 1980s. The Conservative Government reduced the top rate of tax in two stages, from 83% to 60% and then from 60% to 40%, and the Labour Government kept that rate right up until they knew that they would lose office. They were wise to do so, because over those years the amount of cash paid by the rich went up, the real-terms amount of tax paid by the rich went up and the proportion of total income tax revenue paid by the rich went up. What is not to like about that treble win?

The right hon. Gentleman said earlier that if the top rate of tax was too high people would leave—I presume he meant that they would leave the country. How many rich people have returned to the country as a result of the top rate being reduced from 50p to 45p?

We will be able to answer that question in due course, because these are still early days, but there are encouraging signs that more revenue is coming in from the rich. We will know the results of the latest experiment later, but we know fully the results of the 1980s tax cuts. They were clear enough to convince not only all sensible Conservative MPs at the time, who were happy to vote for the tax cuts and kept them throughout their period in office, but, more importantly, the long-running Chancellor of the Exchequer who took office in 1997 and held it for a decade before becoming Prime Minister. He is not an easy man to convince to be nice to the rich. I think that he decided to run with that tax rate because he was entirely convinced that he would get more money out of the rich at 40% than he would at 83% or 60%.

Does not the evidence show that any increase in the tax paid by the rich is the result of their share of income rising at the same time as everyone else’s living standards are falling?

The main reason they pay more tax, of course, is that they generate and declare more income here, which is surely what we want them to do. If the Labour party is with me so far in wanting decent public services, and if it is with me in accepting that the money for those services has to come from the better-off, because by definition we do not want to tax the poor, then surely it is with me in wanting to have more rich people here to venture, save, put their money at risk and to make more money with their money so that there is more of it to tax. This country is now very dependent on income tax from the top group of earners, who produce 30% of income tax, and on the capital gains tax, stamp duty and other taxes that apply mainly to rich people with big assets. That is sustaining public services. It is very important that Members of this House, who might not like those people—clearly the Labour party dislikes them intensely—recognise that they are very useful members of society and that their revenue is crucial to being able to redistribute money across the country. If Labour Members wish to have more equality, they must think about the optimising rate. Surely it is best to try to find the rate that maximises revenue, rather than a penal rate that satisfies people’s sense of jealousy—or whatever it is—about those who have or make a lot of money.

The right hon. Gentleman is wrong about the Labour party disliking rich people intensely and should retract that statement. If he is not prepared to do so, perhaps he will explain why many people feel that his party dislikes ordinary families and poor families intensely, as highlighted by their policies.

That is simply not true. I am delighted to hear that the hon. Lady likes rich people—there are quite a few in her party, so let us hope she gets on well with them—but it is absolutely false to suggest that Conservatives have no interest in people who are out of tax altogether or who are on low incomes; we are desperately concerned that they should get better educational standards and have more opportunities so that they can get a job and then go on to get a better job. We wish them well, and we are very keen to work with all those in our constituencies so that they can take advantage of opportunities. We would like them to be on higher incomes. In the meantime, unlike the Government she supported, we have taken many more of those people out of tax altogether, because we think that those on an income of less than £10,000 a year should not have to pay tax. They will probably be receiving some benefit assistance.

Another point that the hon. Member for Birmingham, Ladywood did not respond to was the fact that the latest figures show that inequality rose under the Labour Government but has actually fallen a bit under the coalition, mainly because we have taken an awful lot of people at the lower end of the income scale out of tax. We have a very progressive system: the income tax system now exempts anybody on less than £10,000 and has a 47% rate, if we take national insurance as well on the highest incomes; and the benefit system rightly gives a lot of money to people at the low end of the scale and should not give any money to people at the top end.

The right hon. Gentleman has made a number of assertions in his last few sentences. I wonder whether he has seen the report published this week by the Joseph Rowntree Foundation, which states that the cuts in child benefit and tax credits

“have typically created losses double the amount of tax allowance gain for working couples, and nearly four times the amount for working lone parents.”

I wonder whether he has seen the latest HMRC report, which states that the Gini coefficient started to rise significantly in 2012-13.

The figures I have been using refer to the whole coalition period and show a reduction in inequality, which I hope the hon. Gentleman will welcome. I do not recognise his figures on the child tax changes. The overall effect of taking a lot of people out of tax has been a very positive impact on their net incomes, as we would hope.

If the right hon. Gentleman disputes whether an increase in the additional rate of tax would bring in more money, does he agree with the new clause’s call for a report? If it shows that the 50p tax rate brings in more money, will he and his Conservative colleagues advocate increasing it again?

I thought that I had dealt with that point. As far as I am concerned, it was proven conclusively in the ’80s that taking the rate down from 83% to 40% increased the revenue very substantially and on a sustainable basis. That was sufficient to persuade the official Labour party—perhaps not some Labour colleagues here today—not to increase the tax rate from 40% throughout its long years in government until the very end.

Does the right hon. Gentleman not recognise that the economic circumstances are now rather different from those he is talking about. Surely we need a study, as the new clause proposes, to enable us to look at what is happening now.

I do not think that the economic circumstances were as different as the hon. Gentleman thinks. In the early ’80s the Conservative Government inherited an economic crisis from Labour, just as this Government did. There was a lot of unemployment and a big task in getting people back to work and getting the economy growing again, rather like today. The Government at the time managed to do that, just as this Government are, so I do not accept his point.

However, I find the fact that Labour is going backwards on these issues rather perturbing. Why can the modern Labour party not understand the basic points that the Labour party that was victorious between 1997 and 2010 understood fully? Why can it not understand that it is possible to take the tax rate too high and get less revenue? The Treasury has now accepted the doctrine of the Laffer curve and understands that putting the tax rate above the optimising rate would surely be a very foolish thing to do. It knows that that applies to capital gains tax, as it clearly does to income tax. I submit that 50% was well above the optimum rate, because we collected rather less revenue than many people would have liked. I welcome the fact that the Government have started to put that right.

I do not think that we need the study that the Labour party is recommending today, and I advise it to think again about what it learnt in the ’80s and ’90s but appears now to have forgotten. It shows that the former Labour Chancellor was clearly not crowd-pleasing when he refused to increase the rate from 40%—he was clearly antagonising many of his Back-Bench colleagues by not doing so—so there must have been a good reason for it. I think that reason was a sensible one: it would have raised less revenue, rather than more. I urge the Government to reject new clause 14.

It is worth considering some of the context of our debate today on the Finance Bill. Almost 15 years ago, the then Labour Government introduced the national minimum wage. That historic measure increased the value of work for around 2 million people across the UK. At its heart was fairness and dignity for all at work. Yet today we are debating the impact of a substantial tax cut for 13,000 millionaires introduced by this Government. At a time when more than four out of five people surveyed in a recent Ipsos MORI poll said that they faced a cost of living crisis, the contrast cannot be overstated. It would be almost impossible to find so clear a contrast between the ambitions and motivations of two Governments. The bottom line in this debate is that the Government’s proposals in the Finance Bill do almost nothing to address the cost of living crisis.

My hon. Friend mentioned Ipsos MORI. If we look at public attitude surveys, we see that one of the reasons why there is a breakdown of trust in politics is the very approach that she is discussing. People on low incomes—indeed, those on middle incomes—are facing a cost of living crisis, while the wealthiest are getting a tax cut. That is why people switch off from politics; they see the double standards being pursued by the Government.

I could not agree more. I heard the speech of the right hon. Member for Wokingham (Mr Redwood), but it is clear that there are major divisions in our society. We should all be concerned about that. Tax breaks are given to those who do not need them—to millionaires; responsible millionaires will admit that the stance being adopted is divisive. We should protect those who are struggling the most as well as ordinary middle-income families in this cost of living crisis. I hope that the Government will take on board some of the points made about the social consequences of the tax inequalities that the Government are introducing and making worse.

Let us take my constituency of Bethnal Green and Bow as an example. Families there are significantly worse off than they have ever been. Child poverty is at 42% and there is still high unemployment. There are still major problems of worklessness and young people who are not in training or education. That is a major problem around the country: 870,000 young people remain unemployed.

Changes in taxes and benefits made since 2010 make one-parent families working to support children an average of £3,720 a year poorer. That staggering fall in living standards will affect the most vulnerable. The issue is not envy, but the fact that my constituents are struggling. They will rightly continue to ask why millionaires in the City are receiving a tax cut from the Government of about £100,000 a year. My constituents are working hard to make ends meet and their children are living in poverty. While they continue the battle to survive, they ask why the Chancellor is giving £3 billion a year in tax breaks to millionaires. How is that fair? How are we all in this together if that is the Government’s priority?

I am here to debate the new clause. I am focused on what the Government are doing. I support the new clause because it is not fair that £3 billion a year should be going to millionaires. On top of that, as my hon. Friend the Member for Birmingham, Ladywood (Shabana Mahmood) mentioned, bonuses in the financial sector are up by 83%. My constituents are living between the City of London and Canary Wharf; they see the inequities and want a fair chance. They are not complaining about people earning a decent living, but they want the Government to be fair in how they tax.

The hon. Lady represents a seat next door to mine. We both have significant numbers of constituents living, as she would put it, in poverty—although poverty levels today are very different from those certainly in the first half of the last century and before—and significant numbers who are relatively well off. Does she not recognise that by reducing tax rates we are bringing more money into the Exchequer? She says that the issue is not about the politics of envy, but does she not recognise that higher rates of tax would bring less into the Exchequer to pay for the very services that our more poverty-stricken constituents so desperately need? She is undermining the very case she tries to make.

I have great respect for the hon. Gentleman, but I do not agree. My hon. Friend the Member for Birmingham, Ladywood set out the facts in her speech, so I will not reiterate them; others want to speak. The hon. Gentleman will know about the disparities all too well. The Government have a responsibility to make sure that the tax system is fair, and fairness is at the heart of a progressive tax system admired by people in other countries. The changes that the Government have introduced—prioritising tax breaks for those who least need them while ordinary families continue to struggle—are deeply disturbing and unfair.

We are hearing people say, “Tax them less and they will pay more.” Why does that not work all the way down the tax scales? We are seeing middle-income families being sucked into higher tax brackets to pay for the lifting of the less well paid out of tax altogether.

The Government have made a great deal of their efforts to support middle-income families, but frankly their words have been empty. They have prioritised those at the top. Will the Minister say whether his Government will rule out reducing tax further for high earners to 40%? I give him the opportunity to say so now. The revenue that the Government are forgoing could be used to support others—to get young people back to work, for instance.

I will not give way again as I am conscious that others wish to speak. I will conclude.

The Government’s so-called long-term plan should not be pursued at the expense of those in lower and middle-income families. That is why the new clause would rightly force the Chancellor to publish how much extra tax would be paid by high earners under the 50p rate. That would establish how much those earning more than £1 million per year would contribute. That would go a long way towards giving us the clarity we need.

Our vision is to work towards cutting taxes for the 24 million people on middle and lower incomes through the introduction of a 10p starting rate of tax. That is not only the way to a fairer system of taxation but the only way to nurture sustainable growth for all. After three years of flatlining, the growth that we are beginning to see is welcome, although it is still coming much slower than it is to countries such as the US and Germany.

Opposition Members have a vision for a broad-based recovery forged through the efforts of all people from all backgrounds. We must remember that average wages will have fallen by 5.6% by the end of this Parliament. How does that make our society one in which we are all in it together? I do not hear members of the Government or Government Back Benchers use that phrase any more. I challenge them to use it today if they still believe that it is not a joke as far as most people in this country are concerned. Only Labour’s plans for a fairer and more progressive taxation system will support the return of wages to a level seen before 2010.

In conclusion, I return to the basic premise of Labour’s argument. It is simply not acceptable or fair for millions of people to pay more in tax while millionaires pay less. Since 2010, tax rises and cuts to benefit have left average households worse off. Real-terms decreases in wages across this Parliament have made the financial plight of ordinary people across the UK tougher. People have become dependent on food banks as they have never been and there is rising homelessness in cities such as London. There is rising poverty—child poverty in particular—not only in my constituency, but up and down the country, but this Government still find the energy and will to reward the top 1% of earners while everyone else suffers.

The Government have pandered to the worst suggestions of their critics, namely that they are out of touch, have failed to spread any meaningful recovery to those who desperately need it and are out for the few and not for the many. For those reasons I support Labour’s proposals on the tax cut and support the new clause.

It is a pleasure to follow the hon. Member for Bethnal Green and Bow (Rushanara Ali). I agree that we should be aiming for a tax system that is as fair as possible and accept that the timing of the top rate cut was not good for public relations or for feelings throughout the country. But let us examine the genesis of this situation.

In 2010, 6 April was an important day. It was the day that the top rate of tax was raised from 40p to 50p. It was also the day that Parliament was dissolved—the very last day that Labour Members sat on the Government Benches. They were sat on these Benches for one day with the top rate of tax at 50p. Clearly, as the right hon. Member for Wokingham (Mr Redwood) said, the rate was raised in the full knowledge that Labour was likely to lose the general election. It was the then Chancellor’s leaving present, which he knew would keep leading to headlines and would be the gift that kept on giving. Listening to the speeches made by Opposition Members today one would imagine that there had been a 50p tax rate throughout their time in government, and not simply on the last day on which they sat on the Government Benches.

Does the hon. Gentleman, as a Lib Dem, not recall that that date was significant in another way, as it was the day that the leader of the Liberal Democrats signed a pledge to get rid of tuition fees?

Mr Deputy Speaker, I am sure you would call me out of order if I responded to that point.

Labour’s Chancellors were not slow to raise taxes—in fact, there is a long list of almost 100 taxes that they raised in 13 years—but strangely enough, they did not raise this one. Again, as the right hon. Member for Wokingham eloquently said, they knew that it was dubious that raising the top rate of income tax would lead to actual benefits. He mentioned the experiments of the 1980s in this country; François Hollande is conducting a live experiment right now across the channel and is getting very much the same results, with one prominent French citizen, Gérard Depardieu, moving all the way to Russia to avoid penal tax rates.

The hon. Member for Birmingham, Ladywood (Shabana Mahmood)talked about the need for analysis. I make two suggestions. First, I presume that during the 13 years of the previous Labour Government a great deal of analysis was carried out on whether raising the top rate was the right thing to do—as I said, they were not slow to look at new ways of raising money and clearly kept on rejecting it as an option. The Institute for Fiscal Studies has now studied Labour’s proposal to raise the top rate back to 50p and has said that it is of dubious benefit. In fact, I think the hon. Lady herself said that it could cost money and would not be drawn on whether that would make her change the policy.

We ought to take what the Labour party says with a pinch of salt. It cut taxes every single year for millionaires.

The hon. Gentleman is making an interesting speech. Is he making the commitment today that the Liberal Democrats will not have this proposal in their manifesto for the next election?

I am not committing anything for our next manifesto, just as the hon. Gentleman’s party is not as yet. Our manifesto is being discussed now.

I will check Hansard to make sure that this is accurate, but I think the hon. Gentleman said that some of the figures were dubious. If he genuinely believes that, why does he not vote for the new clause so that we get figures that are not dubious? Perhaps we can then assess whether a 50p tax rate is correct. Indeed, while he is going on about tax rises, will he confirm to the House whether he thinks a VAT increase is a Tory tax bombshell?

I do not see VAT mentioned in the new clause. I was pointing out that, as the hon. Gentleman’s own Front Benchers say, the analysis of the benefits of the policy comes out as plus or minus zero: it could have a large cost or be a significant benefit. If we are in that sort of ballpark, we are clearly not talking about huge measures that will cut the deficit.

Under this Government, the wealthy have been paying a lot more every year in income tax than they ever did in any year under Labour. They are paying more in many other ways as well. The Labour Government thought it was okay for the wealthy to pay £250,000 in pension contributions and get full tax relief; the coalition Government have reduced that to £40,000, making £95,000 a year of tax benefits that the Labour Government were happy to give but this Government are not. Capital gains tax was at the derisory level of 18%, and is now 28%. The level the Labour Government charged on capital gains was lower than the rate of income tax, so hedge fund managers could be paying a lower rate of tax than the people who cleaned their offices, a truly shameful record.

If anyone is lucky enough to be spending £1 million a year, they will be paying £25,000 more in VAT. To answer a point made by the hon. Member for Newcastle upon Tyne Central (Chi Onwurah) earlier, people on low pay spend very little on standard rate VAT items. Once again, the right hon. Member for Wokingham mentioned this: most of the day-to-day living costs of most people—housing, energy, food and many other costs—do not carry standard rate VAT, so the wealthy are paying more there.

The thresholds for inheritance tax were going up under Labour but have been frozen under this Government through the efforts of the Liberal Democrats. We know that the party with which we are in coalition would like to return the level to £1 million, as it campaigned on that during the last election and I believe it will do so again next time. We are pleased that the threshold for inheritance tax has been frozen throughout our time in Government, because we feel it is the right thing to do at this time. We also saw industrial-scale tax avoidance under the previous Government, and many cases now arriving in court go back to the days when they were in power. The idea that this Government are not taxing the wealthy does not stand up to examination.

I am sure that the right hon. Member for Birkenhead (Mr Field) would agree.

The hon. Member for Redcar (Ian Swales) is making an important and courageous speech from the Liberal Democrat Benches. It is one that many of us on the Conservative Benches could have made, and I thank him for putting some of the issues that have been raised today into perspective. There has been a lot of outrage on the Opposition Benches but it is important that the history of precisely what went on during the previous Labour Government is put on the record.

I thank the hon. Gentleman for that. I agree that it is important: the narrative that Labour taxes the rich until the pips squeak and that we do not does not stand up to examination.

May I add some grist to my hon. Friend’s mill by asking whether he agrees that it is astonishing that during 13 years in government the Labour party never found the time to impose VAT on the purchase of private jets? The coalition Government have introduced that.

My right hon. Friend’s remarks stand on the record. Perhaps what he has said can tell us something about the travel movements of a previous Business Secretary, whom I will come back to in a moment.

The new clause also refers to levels of bank bonuses. As I understand it, the Opposition want in future to tax bank bonuses at 100%, with 50% on the individual and 50% through the bank. What assessment have they done of what that policy will do to the level of bank bonuses? It seems like another example in which the headline comes first and the policy follows behind.

The Opposition had 13 years to deliver their vision for the country. If we look at all the various levels of tax that they presided over, they carried out the wish of the former Secretary of State for Business to whom I have just referred, the former right hon. Member for Hartlepool, who said that he was

“intensely relaxed about people getting filthy rich”.

Uncharacteristically, I will come to the aid of the former right hon. Member for Hartlepool, because his sentence went on to say—and it was the same sentence—

“providing they pay their fair share of tax”.

The right hon. Gentleman makes a fair point. Throughout the last Parliament, that fair share was deemed to be 40% on the top rate until the very last day. We should judge the Labour party on what it did, not on what it now says.

On the new clause, I am not sure that we state in Bills that there should be reports. It betrays a desperation that we should all reject.

I will be fairly brief.

Under the last Government, I moved amendments like the new clause on virtually every Finance Bill. It has always made me anxious when Governments resist the requirement to provide information. That is all that is sought in the new clause. It simply looks to ensure that the House is properly informed about the impact of a differential tax rate. For the life of me, I could not understand why such amendments were resisted by the last Government, and I cannot understand why the new clause is being resisted now.

On the point about being informed, does the hon. Gentleman think it unwise that the Leader of the Opposition has already stated that he will increase the rate to 50p?

I want openness and transparency. I would prefer people to put their cards on the table in the run-up to the general election, so that the electorate know where everyone stands. It would be invaluable for all parties in the House to have the information that is requested in the new clause, so that they could test it and see whether the hypothesis that has been put forward by the right hon. Member for Wokingham (Mr Redwood) and others is accurate. I do not believe that it is.

This debate goes much wider than the 50p rate of income tax. Members need to wake up to that. A few months ago, the Mayor of London ordered water cannon in case there are more demonstrations and riots. There is a deep feeling of unease and a building anger in our community about inequality. People do not usually mobilise and go out on the streets in the depths of a recession. Let us look at what has happened elsewhere: people get angry, mobilise and go out on the streets when they feel that the country is coming out of recession, but they are not sharing in the benefits from the sacrifices that have been made. We have asked people in this country to make immense sacrifices.

We should look at the various reports that have come out. A few months ago the Oxfam report exposed the fact that for the first time more of the people who are in poverty are in work than out of work. More children are therefore growing up in poverty in working families than in non-working families. I think that that is a first in the history of this country. A survey by Save the Children showed that, as a result of poverty, a staggering number of parents are going without food so that their children can eat. It showed the number of children who have never had a winter coat because their parents are unable to afford one. All that is building up into a significant anger about the inequality in our society.

Taxation rates are therefore not just about the income that they raise; they are about tackling inequality. The right hon. Member for Wokingham said that this has been happening over a long period. We now live in a society that is more unequal than it has been since Victorian times. It is true that for a short period in this recession, the Gini coefficient went down for two years. However, according to HMRC figures, it started rising again in 2012-13. I think that that will provoke anger in our community. Politicians need to be aware of that anger. Unless we do something about it, it will be difficult to contain.

That is why Governments need to be seen to be addressing the appalling inequality in our society. One way of doing that is to redistribute wealth, as Governments ought to do. The new clause does not talk about the vast maldistribution of wealth in our society. One publication from the Treasury revealed:

“The top 10% of earners in Britain have salaries which are equal to more than the bottom 40% of earners”.

That is absolutely staggering, and that is just about earnings: in some FTSE 100 companies, the chief executive and the directors earn 166 times the average wage of the workers.

Taxation is about addressing inequality. The new clause simply looks at one element of taxation and asks for an accurate report on whether it helps in the redistribution of wealth and in tackling inequality.

The hon. Gentleman has expressed his concerns about rising inequality. Why does he think the Opposition have been so timid in proposing remedies? Are they afraid of something? Are they worried what the media might say?

I will give the Labour party the benefit of the doubt. It has the national policy forum at the weekend, where there is the discussion and development of policy. That is the healthiest level of democracy we have had in the party for a number of years. I hope that it is bubbling up into a comprehensive programme that we can put before the electorate and that addresses the central issue of inequality. One way of doing that is to have accurate information before us, which is what the new clause seeks.

I will finish there because I know that other Members want to speak. I just warn the House that unless we address inequality, we will reap a whirlwind in our society. We saw riots only a few years ago. I think that the injustices in the distribution of wealth will provoke even greater conflict in our society unless it is addressed.

I shall be brief. The new clause would force the Chancellor to publish a report that made it clear how the Government were balancing the books on the backs of the poor. [Interruption.] Ministers may laugh, but that is why they are afraid to make the information available. The benefits of rising prosperity and productivity are increasingly concentrated on a small group at the top.

At the same time, there is growing evidence that economic inequality is a drag on the economy. Business profits, literally, from being part of a better functioning and more equal society. Businesses can function only when people form a society that is structured around the principles of trust, responsibility and fairness.

I will not give way because other Members want to speak.

From the “The Spirit Level” by Wilkinson and Pickett through “Capital in the Twenty-First Century” by the current economic rock star Thomas Piketty to “The Entrepreneurial State” by Mariana Mazzucato, economists and social scientists are raising their voices against the claims from Government Members that inequality is good for growth. Recent analysis concluded that

“inequality is bad for both the magnitude and sustainability of growth”.

Before Government Members jump in, that is the view not of some left-leaning sociologist but of the International Monetary Fund.

Equally, President Obama’s chief economic adviser has said that reducing inequality is good for growth. In other words, we must not balance the efforts to reduce the deficit unfairly on the poor, as they are less likely to be in a position to reap the benefits of any growth that follows. None the less, that is exactly what the Government are seeking to do.

The new clause would make the impact of the Government’s policies absolutely clear. I know what the impact of their policies is from my Newcastle surgeries. One constituent who is on a low income uses his so-called second bedroom to store his wheelchair and oxygen bottles. The result is rent arrears and constant anxiety. The threat of eviction hangs over his head. He is only hanging on because he believes that the next Labour Government will abolish the hated bedroom tax. And yet, at the other end of the income scale, taxes are being cut. If the rest of the House does not join Labour in voting for the new clause, people will know what to think.

The next Labour Government will reverse the £3 billion tax cut for the top 1% of earners to ensure that the books are balanced in a fairer way. We will cut taxes for 24 million working people on middle and low incomes with a lower 10p starting rate of income tax. At the next election, the Labour party will put an alternative vision to this Government’s classic 1980s trickle-down economics to the British people. Our vision is to build a new kind of economy that works for communities and ordinary people, and that does not put a premium on social and economic inequality.

It is a great pleasure, as always, to follow my hon. Friend the Member for Newcastle upon Tyne Central (Chi Onwurah). New clause 14 is simple, and I cannot understand why the Government would not want to produce figures showing whether the 50p tax rate raises more or less money. When the Budget was announced, the Red Book stated that the tax cut would cost £3 billion. If politics is the art of the possible, it is also about priorities, and if we consider the priorities of this Government, we see clearly why that cut was unfair and should be reversed, and why the Government should accept new clause 14 and state why they think that lowering taxes for millionaires is the right thing to do.

We have already heard from my hon. Friend the Member for Newcastle upon Tyne Central about the bedroom tax—that was a priority introduced by this Government. The bedroom tax raises only 10%, if not less, of the £3 billion that the 50p tax rate cost. The use of food banks has exploded across the country in all our constituencies, which is a disgrace in a modern society, and people on welfare are waiting for their personal independence payment applications to be processed—at the current rate it will take perhaps 42 years. Tuition fees have trebled, which is hitting young people and aspiration in this country, and we have seen the NHS privatised, with money spent on a top-down reorganisation that nobody voted for. Those are the priorities that the Government have introduced, which is why it is important to get from them in black and white as part of the Finance Bill the implications of what a tax rate does, what it raises, what it does not raise, and how much other levels of tax could raise. It may be that some of the pernicious policies introduced by the Government could be reversed if they realised that they could raise more money from different levels of taxation.

I am afraid we do not have much time, but if there is time at the end I will take an intervention.

Many hon. Members have mentioned the wages crisis in this country, which is of course connected to taxation. We also have a cost of living crisis: people will be £1,600 a year worse off by 2015. We have a youth unemployment crisis, and we are in danger of writing off another generation of young people, as happened in the 1980s when all those wonderful top rate reductions in tax were being made; and we have the lowest rate of house building since the 1920s. All these are priorities that the Government could put to the top of their policy agenda instead of concentrating on a tax cut for the wealthiest.

On the back of all this, we have a Chancellor who has set golden rules for the economic cycle but who has failed on pretty much all of them, while taking £3 billion from the Treasury’s coffers with this tax cut. The UK has lost its triple A rating, and not only will the Government not balance the books by the end of this Parliament, but they will borrow £75 billion this year alone— £190 billion more than planned. They have missed their targets for the deficit and for debt, and they broke every fiscal rule that they set themselves. What is their answer to the conundrum? It is to cut the top rate of income tax for the very richest in the country. Everyone has seen an increase in VAT, which is the most regressive tax; and we have had the granny tax—the list is endless. If politics is about priorities, the Government should come forward with a report, as suggested in new clause 14, and say how much the tax would raise or not raise. We can then decide whether it was the right idea and priority to lower that tax, alongside the long list of this Government’s failures, including social policy failures.

I was interested to hear the intervention from the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards), who is no longer in his place. He wanted to talk about the 50p tax rate. I am very surprised that our Scottish nationalists have not mentioned it—they refuse to confirm whether or not an independent Scotland would back a 50p tax rate because the answer is no.

I am being told to wrap up, so I shall do so by saying that a tax cut for this country costs £3 billion, according to the Treasury’s figures. The Government are standing up for the wrong people, they have the wrong policies, and new clause 14 needs to be approved by the House.

On a point of order, Mr Deputy Speaker. Can you confirm that if an hon. Member is mentioned in the Chamber, the Member who mentioned them is obliged to accept the intervention?

We both know that the hon. Member for Edinburgh South (Ian Murray) is not obliged to give way. The hon. Member for Dundee East (Stewart Hosie) has made the point well, and I am sure the hon. Member for Edinburgh South will finish now because Frank Dobson is waiting.

I meant no discourtesy to the hon. Member for Dundee East (Stewart Hosie), but you were indicating that I should wrap up my speech, Mr Deputy Speaker; otherwise, I would have allowed the hon. Gentleman to intervene. Perhaps he will speak later and tell us his views on the Scottish Government’s refusal to back a 50p tax rate.

I strongly support new clause 14. It would appear that the Treasury’s Orwellian motto is “Ignorance is strength”. It is not just that the Treasury will not have this study done, but it has not had it done and does not know the answer. The Government are clearly afraid of the answer; what have they got to hide? That is typical of the current Treasury position. On a number of occasions I have asked the Treasury what estimate it has made of the income that would come to it from the implementation of a Tobin tax or Robin Hood tax—a tax on financial transactions such as that being sensibly suggested by Mrs Merkel for the rest of Europe. The answer I get is that the Treasury has never made any such estimates. Having never made any estimate of the possible income—and apparently never estimating what it would cost the City of London—the Treasury nevertheless states that it would be fatal for the City to impose a tax of 0.05% on financial transactions, when every other business in the country pays a 20% tax on transactions known as VAT. It appears that the Treasury is into “Ignorance is strength”.

We constantly hear from those on the Tory Benches about the wonders of Mrs Thatcher and how we should follow her example, so I remind them that for nine of the 11 years that she was Prime Minister, the top rate of income tax was 60p in the pound. Apparently, people managed to pay it. Apparently the money came in, and even rich people did not need a greater incentive to turn up at work.

No, I will not give way—[Interruption.] Well, I have sat here throughout the whole debate and listened to what other people had to say, so I am going to get a little further in.

One thing that is particularly irksome for badly off people in this country is hearing apologists for the City talking about bankers’ compensation packages—compensation apparently for the horrid requirement that they turn up at work. The dictionary definition of compensation is,

“recompense for loss, suffering or injury”.

Those bankers—how they suffer when they are helping people to swindle their tax liabilities; laundering money for gun runners or drug runners; or fiddling money to help people evade sanctions and then having to pay up. We clearly need to ensure that those rich people pay more tax, and the only way to do that is by increasing the rate to at least 50p.

It is always a great pleasure to follow the right hon. Member for Holborn and St Pancras (Frank Dobson). He suggested that the motto of the Treasury was “Ignorance is strength”. If that is the case, let me say that his was a very strong speech.

New clause 14 calls for the Chancellor to—

Someone says most of it, but in the time available, I ought to turn to the new clause.

The new clause calls for the Chancellor to publish a report within three months of passing the Act to set out the impact of setting the additional rate at 50% for the tax year 2015-16. In addition, it asks for an assessment of the impact of reducing the additional rate to 45% for 2013-14 on the amount of income tax paid by those with a taxable income of more than £250,000 a year and those with a taxable income of more than £1 million a year, as well as on all those who are liable for the additional rate. It also proposes that the report set out the impact of reducing the additional rate on the level of bonuses awarded in April 2013 to employees in the financial sector. I hope that there will be no controversy when I say that, in order to be credible, any such analysis would need to take into account behavioural impacts, as did the HMRC report on the additional rate that was published at Budget 2012. It is clearly inadequate to look simply at theoretical income tax liabilities when increasing taxes.

Let me use this opportunity to assure hon. Members once more that the Government already consider the impact of any policy decisions taken. The HMRC report on the additional rate concluded that the underlying yield from the introduction of the 50p rate was much lower than originally forecast, due to large behavioural effects.

I want to make this point, then I will give way.

Let me address the matter of behavioural effects. The hon. Member for Birmingham, Ladywood (Shabana Mahmood) conflated the issue of behavioural effects with tax avoidance, and seemed to suggest that the two were synonymous. That is simply not the case. What does the term “behavioural effects” include? If someone decides to retire earlier than they would otherwise do, that is a behavioural effect. If someone decides to leave the country and go to work elsewhere, that is a behavioural effect. If a multinational company, when deciding where to locate a new team, decides to go to another country rather than the UK, that too is a behavioural effect. If someone decides to put more money into their pension—making use of pension tax relief as Parliament has intended—that is also a behavioural effect.

In the eyes of the Opposition, all of that constitutes tax avoidance, and we have been asked why we do nothing about it. I do not know whether they are suggesting that we should take away people’s passports so that they cannot emigrate, or that we should somehow force companies to locate their staff here. Those decisions are behavioural effects over which we have no control, and we have to respond to the reality of the world as it is, rather than as some people might like it to be.

Does the Minister accept that the Office for National Statistics and the Office for Budget Responsibility have said that, after the Chancellor made his Budget announcement about the tax rate, people delayed and deferred bonuses and shuffled their cash around to avoid the system? Is this not actually about very rich people shuffling their money around in order to avoid tax? We need a simple system with a 50p rate, and we need to study it over a long time to determine its impact.

The important point here is that the HMRC analysis explicitly dealt with that issue. Yes, there will be instances in which sums are shifted from one year to another, just as happened when the previous Government announced the introduction of the 50p rate. People brought forward income at that point. The analysis took those behavioural changes into account and excluded them, and still concluded that the 50p rate was ineffective in raising money. Given that HMRC has already carried out that analysis and reached that conclusion, which is consistent with the academic research in this area, and given that the IFS has said that no substantial sums were involved, would the Opposition be determined to go ahead with a 50p rate even though the evidence suggested that it would not raise money? That seems to be their ideological position. It would be illogical and unfair to reintroduce a tax rate that was ineffective at raising revenue from high earners, that made ordinary taxpayers pay more and that risked damaging growth.

The Minister will acknowledge that the IFS has said that this whole area would benefit from greater research. Now that HMRC has more data, that research would perhaps produce more accurate results. Will he take that point on board and support our new clause?

There is no evidence that HMRC’s original analysis was wrong. When the Opposition announced earlier this year that Labour would introduce a 50p rate, they claimed that a new £10 billion had emerged that had previously not been taken into account. That turned out not to be the case, however; they got that completely wrong. The data still point in the direction that HMRC’s conclusions are as I have suggested, and there is no reason to believe that the analysis was wrong. The fact is that the 50p rate is an ineffective way of raising money from the wealthiest.

Is the Minister as concerned as I am that Labour Members are not simply calling for a 50p rate? We have also heard calls for a 60p and a 70p rate. Are they not trying to set the tone for what has already been introduced in France—namely, a rate that is much higher than 50%?

I note the fact that the right hon. Member for Holborn and St Pancras referred to a rate of “at least 50p”, and I suspect that he speaks for many of his colleagues in that regard. The fact is that there is an ideological divide involved here, in that the Opposition want the higher rate, regardless of the practicalities.

The reality is that, if we want to raise money from the wealthiest, a high rate of income tax is ineffective. My right hon. Friend the Member for Wokingham (Mr Redwood) made it clear that the changes in the 1980s resulted in more income being raised from the wealthiest. If we want to raise money from the wealthiest, there are much better ways of doing it, as my hon. Friend the Member for Redcar (Ian Swales) said. For example, we have taken a number of steps to deal with avoidance and disguised remuneration—those measures were opposed by Labour, by the way—and to deal with stamp duty avoidance. We have increased stamp duty rates. We have also introduced measures relating to capital gains tax and restricted the cost of the pensions tax relief. Those measures have raised far more than the revenue forgone from the 50p rate.

We talk about priorities. Let me set out one fact for the House. Even if we put aside the additional sums raised from the wealthiest, and even if we put aside the damage to competitiveness from the 50p rate, for every £1 forgone as a result of our measures on the 50p rate, we have forgone £160 as a consequence of the increase in the personal allowance. That is where our priorities lie, and I am proud of that record.

Will my hon. Friend confirm that the Treasury publishes figures every month on tax collection, and that they show that the rich are paying more?

That is correct. It is a higher proportion than ever; it is more than was being received under Labour—

I really should allow time for the hon. Member for Birmingham, Ladywood to speak. On this record, this Government can be proud.

We have had a good debate on our new clause. As I expected, the tone of the Minister’s remarks suggests that he will not take the opportunity to support it, despite accepting the fact that the Institute for Fiscal Studies has joined us in saying that more research, data and analysis are necessary if we are to get a complete answer on the issues of data and yield relating to a 50p top rate of tax. I note that he did not answer my earlier question about that. If he wants to say to the country that his Government have cut the 50p rate with justification, he should not have shown himself to be afraid of such data. The Government should have agreed to the new clause, as its proposals would have settled the matter once and for all. I ask again, what does the Minister have to be afraid of? We will be pressing the new clause to a vote.

Let us get the figures clear. On the percentage of gross income that goes on taxes, for the bottom quintile it is 37.4% and for the top quintile it is 35%. The poorest pay more.

Debate interrupted (Programme Order, this day).

The Deputy Speaker put forthwith the Question already proposed from the Chair (Standing Order No. 83E), That the clause be read a Second time.

New Clause 7

SDLT: exercise of collective rights by tenants of flats

‘(1) In section 74 of FA 2003 (exercise of collective rights by tenants of flats), in subsection (1A) for “£2,000,000”, in each place it occurs, substitute “£500,000”.

(2) The amendments made by this section have effect in relation to any chargeable transaction of which the effective date is on or after 1 July 2014.

(3) But the amendments do not have effect in relation to a transaction—

(a) effected in pursuance of a contract entered into and substantially performed before 20 March 2014, or

(b) effected in pursuance of a contract entered into before that date and not excluded by subsection (4).

(4) A transaction effected in pursuance of a contract entered into before 20 March 2014 is excluded by this subsection if—

(a) there is any variation of the contract, or assignment (or assignation) of rights under the contract, on or after 20 March 2014,

(b) the transaction is effected in consequence of the exercise on or after that date of any option, right of pre-emption or similar right, or

(c) on or after that date there is an assignment (or assignation), subsale or other transaction relating to the whole or part of the subject-matter of the contract as a result of which a person other than the purchaser under the contract becomes entitled to call for a conveyance.”—(Mr Gauke.)

Brought up, and read the First time.

With this it will be convenient to discuss amendment 67, in clause 107, page 90, line 33, at end insert—

‘(5A) The Chancellor of the Exchequer shall, within six months of this Act receiving Royal Assent, publish and lay before the House of Commons a report setting out the impact of changes made to Schedule 19 of the Finance Act 1999 by this section.

(5B) The report referred to in subsection (5A) must in particular consider—

(a) the impact on tax revenues;

(b) the expected beneficiaries; and

(c) a distributional analysis of the beneficiaries.”

New clause 7 rectifies a minor omission from clause 105 by applying the reduction of the threshold to £500,000 for the 15% stamp duty land tax higher rate charge to the SDLT relief for the exercise of collective rights by tenants of flats.

Clause 105 reduces the starting threshold for the 15% higher rate SDLT charge from £2 million to £500,000 for transactions where the effective date is on, or after, 20 March 2014. This is part of a package of measures including changes to the annual tax on envelope dwellings and the ATED-related capital gains tax charge. The purpose of these measures is to tackle tax avoidance and to ensure that those who wrap residential property in corporate and other envelopes, and do not use them for a genuine commercial purpose, pay a fair share of tax. However, clause 105 omitted to apply the reduction to the SDLT relief in section 74 of the Finance Act 2003.

This relief benefits lessees of flats who collectively acquire freehold of their block under rights afforded by the Landlord and Tenant Act 1987 and the Leasehold, Reform, Housing and Urban Development Act 1993. The relief sets the rate of SDLT according to the consideration given for the freehold divided by the number of flats. This brings the amount of SDLT paid by lessees more into line with what they might have paid had they been able to acquire the freehold of their flat separately. These acquisitions are commonly undertaken by a company in which the lessees are shareholders. In these circumstances, the 15% higher rate of SDLT will apply if the average consideration exceeds the higher rate threshold.

The changes made by new clause 7 mean that where lessees of flats purchase the freehold of their block through a company and claim relief, SDLT will be charged on the purchase price at 15% if that price divided by the number of flats comes to more than £500,000. The new £500,000 threshold applies to the relief where the effective date of the purchase, usually the date of completion, is on or after 1 July 2014. Transitional provisions will, in the great majority of cases, preserve the existing £2 million threshold where contracts were entered into before 20 March 2014. We estimate that the impact of this minor change will be negligible. In practice, very few transactions of this kind are likely to attract SDLT at 15%. I understand that no tax has been put at risk by delaying the implementation of this change.

On stamp duty reserve tax, amendment 67, tabled by Opposition Members, asks for the Government to lay before Parliament, within six months of the Bill receiving Royal Assent, a report setting out the impact of clause 107 on tax revenues and who benefits from it. The Government announced at Budget 2013 that they would abolish the schedule 19 charge as part of their investment management strategy to improve the UK’s competitiveness as a domicile for collective investment schemes.

Schedule 19 is a special stamp duty reserve tax charge levied on UK collective investment schemes, or “funds”. A charge arises when investors surrender back to the fund manager firm either their units in UK unit trust schemes, or shares in UK open-ended investment companies. It is paid by the fund management firm, but the cost is ultimately borne by the investors in schemes. The investors are largely pension schemes, life companies and individual savers. It is worth stressing that this charge is payable only by UK schemes. An identical scheme established outside the UK would not be subject to the charge, placing the UK at a competitive disadvantage as a domicile for collective investment schemes. Investors who do not wish to pay the schedule 19 charge already have the option of investing in funds domiciled offshore.

The schedule 19 regime is regarded as complex and burdensome, requiring frequent tax calculations and returns to be sent to HMRC. Additionally, because of how the tax operates, its headline rate implies a much greater tax burden than the annual cost actually suffered. This is difficult to explain to investors and gives rise to presentational complications when trying to market UK funds, especially overseas. It is for these reasons that schedule 19 was identified as a major deterrent to domiciling funds in the UK, with a particularly damaging effect on the ability of UK funds to attract non-UK investors. Clause 107 repeals part 2 of schedule 19 to the Finance Act 1999, thereby abolishing the schedule 19 charge. This levels the playing field between the UK and other countries as domiciles for collective investment schemes. The abolition has effect from 30 March 2014.

The Government rightly keep all tax policy under review, but there would be little merit in producing a report in the way suggested by the amendment. We have already had the impact of this measure independently assessed by the Government Actuary’s Department. It has calculated that a typical 22-year-old currently earning average weekly earnings and investing the equivalent of 10% of gross income each year over a 45-year period would see a fund value £11,200 greater at retirement as a result of this change—equivalent to approximately 1.3% uplift in total fund at retirement. In current money terms, that is equivalent to an additional £4,600.

I stress again that the schedule 19 charge is borne by investors and not by fund managers. Data from the Investment Management Association suggest about 85% of the charge is borne by pension and insurance companies together with retail and public-sector investors. Therefore, these underlying investors are beneficiaries of the change. Furthermore, as the new auto-enrolment of workers into pension schemes changes the pensions landscape, even more ordinary hard-working people will benefit from the change in future. Further detail on the distributional impact of the measure has already been included in the tax information and impact note produced in December alongside the draft legislation.

As for the benefits due to the improved competitiveness of the UK as a fund domicile location, the time taken to authorise and launch new funds means that any positive effects of the change would not have had time to become established. Therefore, such a report would be premature. For the avoidance of doubt, let me also reiterate the point—which the Government have made on many occasions—that abolishing schedule 19 to the Finance Act 1999 is not a tax cut for hedge fund managers or hedge funds, which have in fact never paid tax under the schedule 19 charge. I noticed that the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) was very careful in Committee not to say that it was a tax cut for hedge funds or hedge fund managers, and I would be grateful if she confirmed that that is the case.

The shadow Chief Secretary says it is a tax cut for investment managers. They are different from hedge fund managers; however, as I have already explained at some length, the tax cut will benefit the investor, not the managers.

I sense from the mood of the House that the Opposition are thinking of opposing new clause 7. If they are, will my hon. Friend make it clear how many hard-working savers will be hit by not receiving this benefit?

My hon. Friend makes an important point. It is investors in pension schemes who will bear the cost. The UK investment management industry, which exists up and down the country—we had a debate about the regional nature of that industry—will also be damaged. The cost makes it hard for UK-domiciled funds to compete. We want UK-domiciled funds to compete. [Interruption.] Maybe that is not Labour’s position, although I note that the shadow Chief Secretary seems to be accepting from a sedentary position that this is not a tax cut for hedge funds.

Again—I hope the record will pick that up—this is for investment managers, not hedge fund managers. That is the argument the hon. Gentleman is making, which is different from the argument we have heard from the Opposition on occasions. For example, in July last year, the Leader of the Opposition accused us of making a tax cut for hedge funds. In the shadow Chancellor’s response to the autumn statement in December last year—he gave a speech that many of us will remember for a long time—he called on the Government to reverse the tax cut for hedge funds. It appears that the Labour Front-Bench position is to accept that there is no tax cut for hedge funds. That, I suppose, is progress. [Interruption.] As the hon. Member for Kilmarnock and Loudoun says, it is for investment managers, not hedge funds. She is still wrong, but she is perhaps less awry than she was. That is progress, and I hope that the Leader of the Opposition and the shadow Chancellor will withdraw any suggestion of a tax cut for hedge funds. We will be looking out to see whether that features in any Labour party promotional material over the months ahead, but I am glad we have made progress on that front at least.

In conclusion, clause 107 supports the Government’s objective to create a more competitive tax system and will increase the attractiveness of the UK as a location for fund domicile. Amendment 67 would serve no useful purpose, given the information already made available about this measure. New clause 7 rectifies a minor omission from clause 105 and ensures that the reduction in the SDLT higher rate threshold to £500,000 operates as intended. I therefore move that new clause 7 be accepted and request that amendment 67 not be pressed.

Let me begin where the Minister left off, on new clause 7. It is worth noting that section 74 of the Finance Act 2003 provides SDLT relief for lessees of flats who collectively acquire the freehold of their block under rights afforded by the Landlord and Tenant Act 1987 and the Leasehold Reform, Housing and Urban Development Act 1993. The relief sets the rate of SDLT according to the consideration for the freehold divided by the number of flats, which brings the amount of SDLT paid by lessees more into line with what they might have paid had they been able to acquire the freehold of their flats separately. As the Minister said, such acquisitions are commonly undertaken by a company in which the lessees are shareholders. Under such circumstances, the 15%, higher rate SDLT charge in schedule 4A to the Finance Act 2003 will apply if the main consideration exceeds the higher rate threshold.

The Minister pointed out that clause 105 reduces the higher rate threshold from £2 million to £500,000 for transactions where the effective date is on or after 20 March 2014. However, clause 105 omitted to apply the reduction to the relief in schedule 74 to the Finance Act 2003, an omission that new clause 7 rectifies. It is welcome that the Minister has brought forward something to deal with that earlier omission and I will therefore not take issue with him on that at present.

Let me turn to amendment 67 and stamp duty reserve tax. I hope hon. Members will forgive me if I confess to having a sense of déjà vu, because it is not the first time we have debated this issue. Not only did we debate it in Committee, as the Minister acknowledged; we also debated it in last year’s Finance Bill. In fact, it is almost a year ago to the day that my esteemed colleague the hon. Member for Nottingham East (Chris Leslie) was standing at this Dispatch Box trying, as I will be, to make the Government see sense and accept our call for a report to be published. [Interruption.] I think my hon. Friend is indicating that he failed on that occasion.

The hon. Gentleman says I am a better woman, but I have to confess that I was not able to persuade the Minister in Committee. However, as always, I am an optimist by nature, so I will venture forth today in the hope, even at this late stage, that the Government can be made to see the light and accept our call for a report to be published.

As I mentioned, it is almost a year ago to the day that my colleague the hon. Member for Nottingham East was standing at this Dispatch Box. It would be remiss of me not to remark briefly that, some 15 years ago to the day, I was in the Scottish Parliament for the formal opening of that august institution. If anyone had suggested to me then that 15 years later I would be standing at this Dispatch Box discussing stamp duty reserve tax, I might have fled and looked for something else to do. Who knows? It certainly was not something that was on my agenda at that point.

However, to return to the amendment, for the benefit of anyone who may have forgotten, amidst all the excitement of the last year, exactly what we were speaking about on that occasion, I want briefly to recap some of the key points from the debate. It is worth noting what our amendment 67 proposes. For those who are following this debate with avid interest, it asks the Government to insert at the end of clause 107, page 90, line 33 a new section 5A, stating:

“The Chancellor of the Exchequer shall, within six months of this Act receiving Royal Assent, publish and lay before the House of Commons a report setting out the impact of changes made to Schedule 19 of the Finance Act 1999 by this section.”

A new section 5B is then proposed:‘

“The report referred to in subsection (5A) must in particular consider…the impact on tax revenues;…the expected beneficiaries; and…a distributional analysis of the beneficiaries.”

I shall return to those issues in responding to the Minister’s points.

Why does my hon. Friend think that the Government are so reluctant to produce this report if, indeed, they see the change as beneficial to all? We see this £160 million giveaway as being beneficial to only one particular group, and not our constituents.

I thank my hon. Friend for that intervention. I can only hazard a guess as to why the Government consistently refuse to look at producing any report or to accept any of the requests—quite reasonable requests—that we have brought forward, seeking further information, further transparency and these particular pieces of information. I am forced to conclude either that the work has not been done or that the Government, for whatever reason, do not wish to share those facts and figures with us. That is a pity because it would help hon. Members of all parties if this information were put forward. I shall come on to deal in a few moments with some of my hon. Friend’s other points, particularly regarding how his and my constituents will be affected.

As the Minister said, the Government new clause removes the stamp duty reserve tax charge for which fund managers are liable when investors sell or surrender their units in UK unit trust schemes or shares in UK open-ended investment companies. Some people have argued that SDRT could essentially be considered as some form of transaction tax—not a term that everybody would use, but it has certainly been argued in that context—currently levied at what seems to be a not unreasonable rate of 0.5%. This is the element that the Government propose to remove.

As I have indicated, our amendment would require the Chancellor to publish a report—I always try to be reasonable, fair minded and mild mannered in my requests to the Minister, as he knows from our many discussions in Committee—to show exactly who benefits and who would be left worse off through the abolition of SDRT on investments in those units trusts and OEICs. As I said in Committee, in these straitened times, hon. Members—as my hon. Friend the Member for Inverclyde (Mr McKenzie) suggested—could be forgiven for assuming that such a generous tax break would fall to those who really need it, such as the millions of hard-working taxpayers who are £1,600 a year worse off under this Government than they were in 2010.

I will give way to the Minister, who I am sure will want to tell me what he is doing for those hard-working taxpayers.

The hon. Lady raises the question of who benefits, which will no doubt be a feature of our debate this afternoon. At this point, however, will she be clear and put it on the record that this is not a tax cut that is relevant to hedge funds?

As I said in Committee and as we have seen in some of the to-ing and fro-ing this afternoon, this tax cut relates to investment fund managers. I hope the Minister will listen very carefully to my points. As my hon. Friend the Member for Inverclyde and I have said, the families that, according to the Institute for Fiscal Studies, will be £978 a year worse off by the next election thanks to the Government’s tax and benefits changes will want to know exactly who benefits from this particular tax cut. I am sure that the Minister is now going to tell us how giving investment fund managers that tax cut will provide support and assistance for the hard-working families in my and my hon. Friend’s constituencies.

I have already set out how this tax cut will benefit those contributing towards their pension. I take it from the hon. Lady’s earlier answer to my intervention that she accepts that this is not a tax cut for hedge funds. Will she explain precisely what the Leader of the Opposition was on about when on 10 July 2013 he told the Prime Minister in Prime Minister’s Question Time that there was a £145 million tax cut for “hedge funds”? The Leader of the Opposition was wrong, was he not?

I am going to come on to the issue of who benefits, but I noticed that, once again, the Minister was not able to say how this particular tax cut proposed by the Government is going to benefit our constituents.

Let me deal with the Government’s tax impact note, which provides some information, saying that the chief beneficiaries of this particular initiative will be the 100 UK fund managers who control 2,500 investment schemes. Hon. Members would doubtless be very concerned if they thought that the overall health of the UK’s investment industry was somehow at risk, which is why the initiative was brought forward. One might think that it was somewhat ailing if it was deserving of a tax cut amounting to, as my hon. Friend the Member for Inverclyde said, £160 million a year. However, if we look at the reality of the industry, we could readily say that it is in pretty good health, raising the question of whether the industry really needs the Government’s help, which could more usefully be put to assisting those hard-working families feeling the squeeze as a result of Government policy.

According to the Investment Management Association, as of January 2014, its members managed over £4.8 billion in the UK on the basis of OEIC funds alone and around £4.5 trillion overall. The association also tells us:

“UK assets under management and funds under management are at record levels, and the UK retains its position as the second largest asset management centre in the world after the US.”

It could well be argued, therefore, that the UK’s investment industry is doing okay— without the intervention or assistance of the Government.

I will give way to the hon. Gentleman if he will tell me how this particular tax cut benefits my constituents and those of my hon. Friend the Member for Inverclyde.

I have been listening carefully to the points the hon. Lady is attempting to make. I still do not understand, however, whether hedge fund managers will benefit from this change; it seems quite clear that they will not.

If the Government, of course, were to produce the report requested in this mild-mannered, sensible and reasonable amendment, we would perhaps have more information on who would benefit—exactly what amendment 67 calls for.

The hon. Lady always puts forward her proposals very reasonably, but I have to tell her that there is no need for a report on this issue. Schedule 19 stamp duty reserve tax is not paid by hedge funds, so abolishing schedule 19 SDRT does not benefit hedge funds. Does she accept the point that this has nothing to do with hedge funds?

I want to move on to discuss further who exactly it does benefit, which is the crucial point. We sometimes hear from the industry that there is some kind of existential threat presented by people moving to Luxembourg, Switzerland or wherever else, but it seems that despite all that, the industry is, as I said, in pretty good health.

One of the things that worry Opposition Members is that the only people about whom the Government seem to be genuinely concerned are those who are already wealthy and privileged. They have cut the top rate of income tax for those earning more than £150,000 per annum—we discussed that earlier, so I shall not say more about it at this stage—and, as bank bonuses rise again, they continue to oppose our proposal for a bank bonus tax to help young people back into work. They have failed to balance the books, as they promised to do, yet it seems that they can still find £160 million a year for those who may not need it as much as others.

Is it not typical of the Government that they can find that £160 million while telling our constituents that times are still hard and they must tighten their belts? The cost of living is driving many of them to despair.

Once again, my hon. Friend has made a very valid point. As he says, many of our constituents in the real world are at the point of despair. VAT has risen, tax credits have been cut, and wages have not kept pace. As my hon. Friend knows very well from his own area, many people are on zero-hours contracts, or are working fewer hours than they would like. Furthermore, the bedroom tax—which we have debated on numerous occasions, and which has been mentioned earlier today—is still having an impact on many people throughout the country.

While all that is happening—and while our constituents are continually coming to our surgeries and contacting us in other ways to tell us about the problems in their lives and how difficult it is to make ends meet—the Government still cling to the notion that the much vaunted recovery is benefiting everyone. I must tell the Minister—I am sure that he has heard similar comments even from Members on his own Benches—that those benefits are not being felt by most of my constituents, and I suspect that they are not being felt by most of the constituents of my hon. Friend the Member for Inverclyde, whose seat is not far from mine.

I could not swear to this, but I strongly suspect that if I asked my constituents what one policy would really improve their quality of life and living standards, they would not be queuing up to tell me that the answer was tax cuts for investment funds. I may be wrong, and I have no doubt that the Government would advance a different argument. Perhaps they would argue that the removal of SDRT for unit trusts and OEICs will produce a fair and proportionate tax rate which will create jobs, revitalise communities and rejuvenate local economies, for that certainly seems to be what they are trying to claim. During last year’s debate, the then Financial Secretary to the Treasury implied that it would create more jobs in regional economies by encouraging investment funds to move to the United Kingdom. What concerned us at the time was the fact that there was scant evidence to back up any of that, and, I cannot, try as I may, find any additional supporting evidence in the tax information impact note attached to this year’s Bill.

In Committee, the Minister told us a wonderfully heart-warming story—to which he has referred again today—about a 22-year-old investor who would benefit from the Government’s changes to the tune of some £4,600. At that time, I questioned whether this was a real 22-year-old who had been found by the Government Actuary’s Department—where from, I do not know. Perhaps the Minister now knows whether it was a real live 22-year-old. In any event, I was interested in the notion.

As I told the Minister in Committee, the majority of 21, 22 and 23-year-olds who have contacted me have done so not because they are concerned about investment funds, but because they are desperate to get a job. They are desperate because they have either finished an apprenticeship and are not being kept on, or because they have recently graduated and are determined to get their foot on the employment ladder. Most say that they would take any job that was available in order to have an opportunity to build towards something that would make the best use of their skills. Unfortunately, I think that the notion that their first decision will be about where to invest for the long term does not apply to most of them. As well as trying to find work, those 22-year-olds, and many other young people—perhaps including people aged 30 and beyond—are desperate to get on the housing ladder, and it is becoming increasingly difficult for them to find opportunities to do so.

My hon. Friend has described a number of desperate scenarios with which the Government could help to deal, but they have chosen the desperate scenario of a fund that has grown by 6.5% for the last four years and is worth trillions of pounds, and have decided to give this particular desperate fund an extra £160 million.

As I said earlier, one thing that the Government could do and have consistently refused to do would help thousands of people throughout the country: they could abolish the hated bedroom tax. They could also accept our proposal for a tax on bankers’ bonuses, and adopt our properly designed programme to get young people back into work and give them the start that they want. Until we get young people into work, ensure that they have adequate housing and ensure that they can have a decent quality of life, the majority will not have an opportunity to think about saving from one year to the next, let alone trying to invest for the longer term. In Committee, I asked whether it was only me—or only Opposition Members—who held this view. My hon. Friend the Member for Gateshead (Ian Mearns) made a powerful speech in which, like my hon. Friend the Member for Inverclyde, he described the reality of what was happening to young people in his constituency.

I have looked at the tax information impact note again, in search of further details of that 22-year-old’s story, but I can find nothing that explains how such people will benefit. The only reference to benefits for investors was this rather disappointing revelation:

“This measure could improve returns on investments (including pensions) but would otherwise have no impacts on individuals or households.”

I do not yet see how the measure can benefit the people we are trying to represent.

I am sure that we would all like to hear the next chapter in the 22-year-old’s life story, and if the Minister has any more information to illustrate the fact that he is just the kind of person who stands to benefit from this measure, I am genuinely willing to hear it. However, in the absence of any such information, I shall return to the subject of amendment 67.

Our amendment invites the Government to lay out clearly and transparently exactly who will benefit from this policy and by how much. In Committee my hon. Friends expressed on a number of occasions the view that this is just another tax break for the Government’s friends in the City. While it does look like that, we are open to giving the Government the chance to prove otherwise. That is why our amendment asks the Treasury to publish the costs to the Exchequer in order to ensure that a list of beneficiaries and a distributional analysis for the abolition of stamp duty reserve tax are put into the public domain. That way we will be able to see all the facts as to who the Government are really concerned about.

Of course, if the Government do not agree to our amendment, we will be forced to conclude that this is just another tax cut for the wealthy, just as we suspected all along. We would also have to conclude, in the absence of any information to the contrary, that any claims of jobs created in regional economies are about as robust as the Prime Minister’s stance on Europe has been, and we would have to look a lot harder to try and find something in this which would create jobs, as seems to have been suggested on previous occasions, because I cannot for the life of me see how that stacks up. If we really want to tackle some of the regional imbalances, let us look at some of the announcements that have been made today, in terms of the reports put forward by the Opposition, about how we can create more wealth and look to ensure that power and resources are devolved to some of our cities and we tackle the issues around infrastructure in the regions.

In the light of the response when we tabled this amendment in Committee, I have to say that I am not at all confident that the Government are going to agree to provide us with the transparency we so urgently need. Again, if we look back to what was said in Committee, we find that the Government were not particularly transparent in terms of the information we were given, because, along with the story of the 22-year-old, speakers on the Government side were keen to stress that, because it is fund investors as opposed to fund managers who will benefit from the removal of SDRT, it would greatly boost investment. Again we have to question whether any increased investment would directly benefit those investment fund managers. Hon. Members were also very helpful in trying to enumerate how many people are currently employed by the industry, but try as they might, they failed, as did the tax information and impact note, to detail that important point about how many jobs would be created by the abolition of SDRT.

We also heard that the tax as it currently operates is

“an uncompetitive charge that puts UK-domiciled funds at a disadvantage to funds domiciled elsewhere”.––[Official Report, Finance Public Bill Committee, 10 June 2014; c. 412.]

That does not square with the idea that the UK investment management industry is doing so well that it is the second largest in the world, beaten only by the US.

I want to draw to a conclusion soon because I put quite a number of questions to the Minister in Committee and it would be useful for us to give him some time to respond to them, as he was not necessarily able to do so in Committee. It is important that we give him the chance again today, therefore. Unsurprisingly perhaps, the Minister is continuing to steadfastly—albeit politely—refuse to countenance our amendment for two reasons. First, he seems to be suggesting that the information requested has already been covered by the tax information and impact note, which, as I hope I have outlined, it does not seem to me to do in any clear and transparent way. The other argument that came up in Committee is that it would be difficult and it would perhaps take longer than six months to do. I am sure—and I am sure the Minister will understand this—that should he wish it to be so, he would be able to utilise all the capacity of the Government to overcome any difficulties, and indeed to ensure more information and a report were brought forward, and I am sure he would also be able to use his good offices to have his Government provide us with considerably more information than is currently contained in the tax information and impact note. It would also be helpful if the Minister could give us more information in his winding-up speech as to why he thinks it would not be possible to do this within a six-month deadline, as we have asked in our amendment.

In conclusion, this is all about priorities. The Government’s measures will reduce Exchequer revenues by more than £800 million over the course of the next five years if this particular measure goes ahead. That funding could be used in a variety of ways, and the Government have to be held responsible for the choices they make. Our amendment simply asks them to undertake that assessment and put the information in the public domain, so that we can see who benefits from this initiative and how it would benefit the wider public. The Government have not made that case; they have not shown how the measure would have an impact on our constituents—for the most part they seem to suggest it would not have any impact on them—and they have not answered the questions put previously about job creation and the impact on the regional economies.

Let me therefore remind the Minister of some of the questions we posed in Committee—I am sure other Members will wish to contribute, but he will also want to answer these in his summing up. The Investment Management Association is saying that the industry is doing very well, so why are the Government handing this tax break to the industry? What evidence can the Minister provide to us, even at this late stage, to suggest that the measure will have a positive impact on the UK economy and, in particular, the jobs market? Unless my memory fails me, he has not so far been able to give me a concrete number on the jobs he expects to be created or any more information about the regional benefits that have been referred to. Can he do that now? It would be helpful if he could do that and if he could set out all that information today. In those circumstances, perhaps I would consider whether our amendment was necessary. I suspect that he will not be able to give that information and will not be able to provide the clarity and transparency we seek, so I strongly suspect that when the time comes, I will seek to press my amendment to a vote.

It is a pleasure to respond to this short debate. The hon. Lady has an admirable ability to make unreasonable requests in a very reasonable way, and it falls to me once again to decline her offer, as Treasury Ministers have done in the past when a review or report is sought from them during a Finance Bill debate.

Let me quickly try to address some of the points raised, the first of which relates to the impact on the industry, the competitiveness argument and what we can do to assess that. It is worth pointing out that this measure came into effect only on 30 March, and it will take longer than six months for evidence of how the benefits of the change are accruing to investors to become available. So the report requested in amendment 67 will not adequately be able to do justice to that question.

Another area we have debated on a number of occasions is who benefits from this measure, and I will return to our little engagement on hedge funds. It is worth pointing out that the National Association of Pension Funds, the Association of British Insurers and the Investment Management Association stated their disagreement with the Labour party’s position and its policy proposal last year to reintroduce the schedule 19 charge. They say it would

“impose a £145 million annual cost on the ordinary savers, investors and pensioners, who are the beneficiaries of its abolition.”

That would weaken the UK’s competitiveness as a place for funds to be domiciled. If we are competitive in this sector, we will have more growth and more jobs. Let us be clear that this is not about jobs in the City of London—not that there is anything wrong with jobs in the City of London. The fund management industry directly employs 30,000 people throughout the United Kingdom, and about a half of those jobs are linked to fund domiciles. The jobs are located in many, if not all, the regions and nations of the United Kingdom.

The hon. Lady asked what was in it for her constituents in Kilmarnock or the constituents of the hon. Member for Inverclyde (Mr McKenzie), and I can tell her that the fund management industry employs 3,600 people in Scotland. I am sure that all of us in this House want to preserve and protect those jobs and ensure that the UK is competitive. The jobs involve operational and administrative matters, such as IT, compliance and legal audit services, all of which are relevant and jobs that we want to support and preserve.

Of course I recognise the value and the range of those jobs. Will the Minister tell us exactly what assessment the Government have done on the risk of reintroducing the measure, or indeed on the risk associated with producing a report? Surely he will want to investigate fully the number of jobs that he seems to think might be lost if our measure went ahead.

The hon. Lady puts her finger on an important word, which is “risk”. Yes, a number of jobs are involved. Some 30,000 people are employed in this industry in the UK. About 10,000 jobs are located in regions and nations such as Scotland, the north-west of England and the west midlands. If we have an uncompetitive tax system in the UK, that sector will suffer. There will be a threat to those jobs. We want to see an expanding and thriving sector, but there is a lot of competition from other jurisdictions in which funds can be domiciled. If we do not compete in the sector, we run the risk of losing those jobs.

There is not only the issue of the industry itself and the jobs that can be encouraged and protected in this country if we have a competitive tax regime, but the underlying point that it is the investors who indirectly bear the burden of this tax. That means that contributors to pension schemes—people in auto-enrolment schemes—will receive less in their pension if this tax remains in place. That is something that we should all seek to address. If we want policies that will be good for jobs and good for savers, then abolishing schedule 19 is a good policy. But what do we get from Labour? We get it embarking on a process to reinstate the policy because it misunderstands it. It thought that it was something to do with hedge funds. After it was explained to Labour Members—I have to say that it has been explained to them time and again—they refused to abandon it. I do not know whether it is still their policy to reverse this, or whether they are calling for a report. As I understand it, it is still the policy of the Opposition to reintroduce this tax.

The hon. Lady is nodding her head. I will take that as an acceptance, even though, as we have heard, this is a policy that her colleagues and those higher up in her party appear to misunderstand.

Does the Minister agree that it seems incredibly naive to give away these jobs and reduce these pensions for nothing? Surely the Opposition should better understand the proposed legislation.

It is striking that time and again senior figures in the Labour party went around describing this as a tax cut for hedge funds. It is to the credit of the hon. Member for Kilmarnock and Loudoun that she refused to repeat that accusation. Although she did not quite go as far as she might have done towards putting the record straight, at least she did not repeat the accusation despite being given multiple opportunities to do so. I do worry about the understanding of some issues within the Labour party. Just today, we have seen the example of the confusion about how many jobs have been created inside and outside London. I understand that the Leader of the Opposition is standing by his position this morning, although he did not quote that in his speech—but there we go. I am afraid that this is an example of somewhat shoddy thinking from the Opposition.

On the same theme, did the Minister share my concern about the number of speeches made in Committee by Opposition Members that appeared to suggest that the benefits of the policy would accrue to the managers of the funds rather than the funds themselves?

Yes, I did. There was a complete absence of any understanding of tax incidence and of who ultimately bears a tax, but that, I am afraid, is all too typical.

The removal of schedule 19 is a welcome measure that will ensure that we have a competitive investment funds management set-up in the UK. It will help savers and those investing in their pensions and remove a distortive and uncompetitive tax. It is a great pity, although not a great surprise, that this further measure to improve our competitiveness and to help savers is opposed by the Opposition, and I certainly urge my colleagues to vote against amendment 67, assuming that it is pressed to a vote.

Question put and agreed to.

New clause 7 accordingly read a Second time, and added to the Bill.

Clause 107

Abolition of SDRT on certain dealings in collective investment schemes

Amendment proposed: 67, page 90, line 33, at end insert—

‘(5A) The Chancellor of the Exchequer shall, within six months of this Act receiving Royal Assent, publish and lay before the House of Commons a report setting out the impact of changes made to Schedule 19 of the Finance Act 1999 by this section.

(5B) The report referred to in subsection (5A) must in particular consider—

(a) the impact on tax revenues;

(b) the expected beneficiaries; and

(c) a distributional analysis of the beneficiaries.”—(Cathy Jamieson.)

Question put, That the amendment be made.

New Clause 11

Capital gains tax and employee shareholders

‘(1) The Chancellor of the Exchequer shall, within three months of the passing of this Act, undertake a review of the impact on tax revenues of employee shareholder status as defined by section 205A of the Employment Rights Act 1996, and set out the conclusion of the review in a report.

(2) The report referred to in subsection (1) above must in particular set out—

(a) the impact on total capital gains tax receipts paid to the Exchequer arising from the capital gains exemptions under section 236B of the Taxation of Chargeable Gains Act 1992;

(b) the estimated value of shares owned by employees working in employee shareholder jobs and the number of such employees.

(3) The Chancellor of the Exchequer must publish the report of the review and lay the report before the House.

(4) Subsequent reviews must be completed before the end of each period of 12 months beginning with the date on which the previous review was completed.’—(Catherine McKinnell.)

Brought up, and read the First time.

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

New clause 11 relates to the Government’s employee shareholder scheme, more commonly known as “shares for rights”. It seeks to probe the Government on the scheme’s performance to date and the costs to the Exchequer in the form of capital gains tax exemptions. We have debated the subject at some length, so I thought that it would be helpful to give some background to jog hon. Members’ memories before setting out the reasons why the Opposition tabled the new clause.

The concept of employee shareholders was introduced under section 31 of the Growth and Infrastructure Act 2013, which was part of the Chancellor’s desperate attempt to kick-start growth after three years of a flatlining economy and rising unemployment, particularly youth unemployment. To get more businesses hiring, he created a status of employee known as employee shareholders. They are expected to give up several fundamental employment rights in return for tax advantaged shares in the employer’s company or parent company, issued under an employee shareholder agreement. Those shares would be tax advantageous to employees because up to £50,000 of the shares would be exempt from capital gains tax on disposal.

In exchange for those tax advantageous shares, employees would be expected to waive some of their fundamental employment rights, including the right not to be unfairly dismissed, the right to a redundancy payment, the right to request leave for study or training and the right to request flexible working, and they will have to give 16 weeks’ notice, rather than the usual eight weeks, before returning to work.

Of course, the right to request flexible working and the ability to give just eight weeks’ notice after maternity or adoption leave have been assessed by the Government themselves, in their tax information and impact note, to affect women disproportionately. They acknowledged that when they legislated for this last year. These reduced rights for female employees, in particular, are in addition to the Government’s real-terms cuts to statutory maternity pay—the mummy tax—the scrapping of the health in pregnancy grant and the significant restrictions on the Sure Start maternity grant. That begs the question that many of us are asking ourselves: just what do this Government have against women and families?

The shares for rights scheme has been widely criticised from across the political spectrum—particularly by the business world because of its impact on employment rights and grave concerns about the opportunities that it presents for tax avoidance.

Does my hon. Friend agree that rights are rights—not something to be bought and sold? If we give people rights, they should not be able to be sold to whoever.

My hon. Friend hits on a key point. Rights are rights and should not be up for sale. I will go into some of the concerns expressed about the policy. The TUC, for example, has said:

“We deplore any attack on maternity provision or protection against unfair dismissal, but these complex proposals do not look as if they will have very much impact, as few small businesses will want to tie themselves up in the tangle of red tape necessary to trigger these exemptions.”

Not only do the proposals send out completely the wrong signals about employment rights—I have focused on women’s employment rights, but those rights are affected across the board—but they have been so badly thought through that the general feeling is that they will not have much impact, as most people would not want to enter into the arrangements.

My hon. Friend is making incredibly important points. She mentioned businesses. Does she share my concern that the scheme has not had the support from businesses that we might have expected, for some of the practical reasons that she has raised?

I agree with my hon. Friend’s concern. The lack of transparency from the Government about the interest in the scheme is why we tabled the new clause. It has been difficult to get information about the scheme’s potential take-up—how many businesses have expressed an interest? It has taken a freedom of information request to get even the most basic information, which I will outline a little later.

I should like to quote Justin King, chief executive of Sainsbury’s. What he says relates poignantly to the interventions made by my hon. Friends the Members for Alyn and Deeside (Mark Tami) and for Feltham and Heston (Seema Malhotra):

“This is not something for our business. The population at large don’t trust business. What do you think the population at large will think of businesses that want to trade employment rights for money?”

I could not have expressed it better myself.

Does my hon. Friend agree that the measure lacks basic human dignity, which should be at the forefront of all public policy legislation? Does she agree with Lord O’Donnell, the former head of the civil service, who said that it was a form of modern slavery?

The proposition risks ringing of that. It lacks an ethical approach, given that it trades people’s rights for £2,000 of shares. More than that, it flies in the face of what we know to be true about productivity and engagement. We know that engaging a work force and building their trust makes businesses more successful. Sarah Jackson, chief executive of Working Families, says:

“It also flies in the face of everything we know about productivity and employee engagement. Treat your employees well, give them the flexibility they need, and you will be rewarded by highly motivated and high performing employees.”

The proposal we are discussing goes in completely the opposite direction, undermining the rights of employees and buying them off with shares that could carry a lot of risk for them. It is no wonder that so few businesses have taken up the offer.

That is the key point, is it not? Share schemes and share option schemes are fantastic incentives in their own right. That is what should be promoted, not the link with the withdrawal of rights, which is absurd and preposterous.

I agree with the hon. Gentleman. He sums up the point at stake. The scheme seems to confuse and conflate two different issues: employee ownership of shares in a company—something we fully support—and employment rights. There seems to be a belief that one can be traded for the other and that that will create an entrepreneurial work force, when in fact it undermines productivity and performance and is so unattractive that few businesses have taken up the offer, we believe. But that is the reason for the new clause: we want to get to the truth of exactly how many businesses are interested in taking up the scheme.

To build on that important exchange, Labour supports employee ownership, but coupling it with slashing employment rights is not only contradictory but counter-productive. Do we not need a way in which we can support employee ownership alongside employment rights? That is how we will get a motivated and engaged work force. Partnership between management and staff is the right way to get the focus on high productivity and long-term incentives.

My hon. Friend speaks passionately and I absolutely agree. Employee ownership is something we should be talking about and finding ways to support. That is why it is so disappointing that the Government wasted the opportunity to boost the cause of employee ownership and shareholding, and have undermined it by framing the argument so unfairly. It smacks of the Adrian Beecroft fire-at-will proposals and does not ring true for most businesses, which do not want to conduct their affairs in that way. They want an equal partnership with their employees to build the business together, knowing that in most circumstances their work force are their key asset. Undermining and cutting employment rights will potentially undermine the trust in a business between employers and employees. That is not the way to build a successful, strong business for the future.

The policy was the centrepiece of the Chancellor’s speech to the 2012 Conservative party conference. He suggested at the time that his grand idea would herald a new three-way deal between employer, employee and the Government, in which employees give up their employment rights, the company gives shares and the Government grant tax exemptions on those shares. In his words, it is swapping “old rights”—as if they are no longer required—

“with new rights of ownership.”

I want to be absolutely clear that we do not oppose the concept of employee ownership. We are aware of its benefits for both employees and employers alike, but we strongly object to its being linked to the removal of employment rights, which serves to undermine the whole concept. Ministers need to make it easier to hire people, not to fire them, but the Chancellor is kidding absolutely nobody by trying to claim that the scheme does anything other than encourage that.

The Chancellor talks about new types of ownership rights, but the Employee Owner Association, which describes itself as the voice of co-owned business, has pointed out that the scheme serves only to discredit and undermine genuine employee ownership schemes—schemes that we fully support. The chief executive of the Employee Ownership Association has said:

“There is absolutely no need to dilute the rights of workers in order to grow employee ownership and no data to suggest that doing so would significantly boost employee ownership.

Indeed all of the evidence is that employee ownership in the UK is growing and the businesses concerned thriving, because they enhance not dilute the working conditions and entitlements of the workforce.”

We need only look at the comments of our colleagues in the other place, including a number of former Tory Cabinet Ministers, before they voted down these measures to see that that view is shared by pretty much everyone outside the Government. Lord O’Donnell said:

“If an employer is offering this, they are probably the kind of employer that you do not want to go near. If an employee accepts it, it is probably because they do not really understand what they are doing. On those grounds, it is bad.”

He went on to ask a question:

“we know that in the old days the price of slavery was 20 or 30 pieces of silver. Is it now £2,000?” —[Official Report, House of Lords, 20 March 2013; Vol. 744, c. 617.]

I could not discuss shares for rights without reminding right hon. and hon. Members of the view of the former Conservative Cabinet Minister, Lord Forsyth of Drumlean. He described the scheme as having

“all the trappings of something that was thought up by someone in the bath”—[Official Report, House of Lords, 20 March 2013; Vol. 744, c. 614.]

Perhaps the Minister will respond to those comments today.

In new clause 11, the Opposition are trying to probe the Government on the take-up that the scheme has achieved so far. A cursory search for “shares for rights” on an internet search engine suggests that things have not been a roaring success. It turns up the following headlines. The FT.com website states, “Chancellor’s ‘shares for rights’ plan flops”. The Guardian says, “George Osborne’s shares-for-rights scheme doesn’t add up”. The Telegraph says, “No take-up on ‘rights for shares’”, as well as, “George Osborne’s flagship rights for shares scheme risks falling flat”. The specialist human resources website, XpertHR, sums it up well with, “Shares for rights: 1.7% of UK employers plan to use employee shareholder contracts, XpertHR research finds”. Even the Deputy Prime Minister has contributed to the headlines, with FT.com reporting in January that “Nick Clegg urges end of ‘shares for rights’”.

I am quoting headlines from internet searches because it is incredibly difficult to get any information out of the Government on the take-up and impact of the policy. The purpose of the new clause is to get to the truth. [Interruption.] I see that the hon. Member for Rochford and Southend East (James Duddridge) is frantically searching on his hand-held device. Perhaps he has found some alternative headlines that he would like to share with the House. Would he like to intervene?

I assure the hon. Lady that I do not do anything frantically. I have been searching. I think that it was on Google, but I am not very good at using this little hand-held box. HR magazine says, “Osborne’s shares for rights scheme could help SMEs”. I do not know whether she needs to update her search engine or whether she is using an internal Labour party search engine that filters out good news stories.

I would be interested to hear more details of that story once the hon. Gentleman has had time to read the entry on his search engine. I am sure that it will help him to provide a robust response to my comments when he speaks in this debate. I look forward to hearing the positive story that he has to tell about the shares for rights scheme. I think that he might be a lone voice in this debate, but good luck to him.

My hon. Friend has quoted some significant voices in this debate and I want to add one more quotation. Justin King, the chief executive of Sainsbury’s, said:

“This is not something for our business… The population at large don’t trust business. What do you think the population at large will think of businesses that want to trade employment rights for money?”

Does she agree that businesses are concerned that the way in which this scheme is being used is not helpful to them? They want to build long-term relationships with their employees, invest in them and find ways to build employee engagement in the profits of the company. Does she also share my concern that this is another way in which the Government are trying to reduce employment rights?

My hon. Friend raises an important point, and that concern has been expressed by a range of voices in response to the proposals—when I say voices, I mean businesses, but also those who represent employees, employee ownership and recruitment agencies. They are all concerned about the proposals ultimately creating a two-tier work force: those who have rights and those who do not.

The Opposition would like to see many problems addressed in relation to some of the insecure working practices that many workers up and down the country are subject to. We know the impact that such working practices have, particularly on those with families and their ability to plan for child care and to know whether they can afford to pay the rent at the end of the week.

People come to my constituency surgery in awful confusion about whether they need to claim housing benefit from one week to the next, because one week they get enough hours to pay the rent, and the next week they do not. That creates a two-tier work force of those who know how much they will be paid and what hours they will work, and those who are left with insecure zero-hour contracts. That potentially creates yet another tier of worker—one who does not have redundancy rights, cannot request flexible working, does not have the right to take time off to train, and one who, if they take maternity leave, has to give four months’ notice instead of two as to when they might return. There is a worrying trend of eroding employment rights that does no good for the workers involved or for businesses, and that strong message has come from businesses in response to the proposals.

Let me return to the criticisms of this policy made by the Deputy Prime Minister in the Financial Times report that I mentioned. That report was telling because it contained the only official piece of information in the public domain about the take-up of the scheme. A freedom of information request from the FT revealed that the Department for Business, Innovation and Skills had received just 19 inquiries about the scheme in the six months to the end of December. That followed a report in The Daily Telegraph last November which found that of 500 businesses surveyed, a mere 0.1%—virtually none—said they were planning to introduce the scheme. The survey also showed that 72% of businesses believed that encouraging employees to relinquish rights would make recruitment far more difficult, in complete contrast to the Chancellor’s claims.

I find that response from the business community incredibly heartening because it shows that businesses in Britain know what makes for a good, strong work force, and for trust between employer and employee. It also shows, however, how completely out of touch the Government are if they think by offering this scheme, they are giving business what it needs. The results of the survey correlate closely with the Department’s own consultation responses, which found that the policy had the full support of fewer than five of the 209 businesses asked to respond. It conceded that only a “very small number” of respondents welcomed the scheme or were interested in taking it up.

To return to the FT report, it is perhaps no wonder that Treasury officials are not particularly optimistic about the scheme’s take-up. Responding to the FT’s FOI figures, an unnamed official admitted:

“This was never going to fly off the shelf.”

Of course it was not—it is divisive, ill thought through, and has proved unpopular among former Tory Cabinet members, not to mention the overwhelming majority of the business community. I gather, however, that those FT figures are the latest information available for the scheme. Will the Minister comment on why that is the case, and explain why Ministers are so reluctant—for whatever reason—to update Members of the House on the scheme’s progress? That is why we have tabled new clause 11. We think that the House deserves to have available the information associated with this scheme.

The FT cited a spokesperson from the Department for Business, Innovation and Skills as saying that they still expected 6,000 businesses to sign up this year. Do the Minister and his officials share the belief in that estimate? Are the Government on track to meet that target? Based on previous figures, consultations and survey responses, I suggest that it is a little ambitious. I am keen to hear the exact figures from the Minister, but if he cannot supply them, I expect the Government to support new clause 11. I am sure that they would also want to ensure that the information be made available to Members.

One could conceive that this policy may have had a well-intentioned goal, but does my hon. Friend agree that, given the feedback on the consultations, the low take-up and now the claims that it could lead to a tax loophole and large amounts of tax avoidance, it could end up being a real own goal for the Government? If the policy is not reversed, it needs to be under active review at the very least—hence the importance of new clause 11.

I thank my hon. Friend for that intervention as it takes me neatly to my next point, which is the issue of tax avoidance. Several people share our concern that the employee rights scheme is potentially vulnerable to significant abuse. I raised that concern during consideration of last year’s Finance Bill, when we tabled an amendment calling on the Government to review the impact of this scheme on tax avoidance activity. That helpful amendment was not accepted by the Government, but I hope that this year—knowing that the Government profess to be keen to clamp down on all forms of tax avoidance—they will accept the need to have the right information available to prove that this policy will not create just another massive loophole.

Buried in the annexes to the OBR’s policy costing document from December 2012 was an admission that the cost of the scheme could rise to £1 billion by 2018—depending on take-up, obviously, and we are looking forward to the figures for that. A quarter of that cost was specifically attributed to tax avoidance—or tax planning, as it is termed in the report. In certifying the figures, the OBR stated that

“there are a number of uncertainties in this costing. The static cost is uncertain in part because of a lack of information about the current Capital Gains Tax arising from gains on shares through their employer. The behavioural element of the costing is also uncertain for two reasons. First, it is difficult to estimate how quickly the relief will be taken up; this could make a significant difference as the cost is expected to rise towards £1 billion beyond the end of the forecast horizon. Second, it is hard to predict how quickly the increased scope for tax planning will be exploited; again this could be quantitatively significant as a quarter of the costing already arises from tax planning.”

Perhaps the director of the Institute for Fiscal Studies, Paul Johnson, characterised the issue best when he wrote, in a Financial Times article aptly entitled, “Shares for rights will foster tax avoidance”:

“There may be a case for more flexible approaches to employment legislation. But as a tax policy, ‘shares for rights’ always looks pretty questionable. At a time of increasing scrutiny of tax avoidance schemes, it has all the hallmarks of another avoidance opportunity. So, just as concern over tax avoidance is at its highest in living memory, just as government ministers are falling over themselves to condemn such behaviour, the same government is trumpeting a new tax policy that looks like it will foster a whole new avoidance industry. Its own fiscal watchdog seems to suggest that the policy could cost a staggering £1bn a year, and that a large portion of that could arise from ‘tax planning’.”

It is bad enough that the policy is unnecessary, divisive, damaging and counter-productive. Those of us on the Opposition Benches pretty much all agree on that, and I have not heard any voices from the Government Benches argue the opposite. I look forward to the Minister’s contribution, once he has managed to find that article that is, apparently, supportive of the scheme. The fact that the scheme could cost the Exchequer up to £1 billion, and that one quarter of that cost could arise from tax avoidance, simply beggars belief. The Minister has previously stated that there are sufficient anti-avoidance provisions to mitigate such activities, but what are the Government actually doing to monitor capital gains receipts and reliefs, and ensure we have evidence of avoidance?

Recent reports from the National Audit Office and the Public Accounts Committee have been highly critical of the Government’s continued creation of complexities and loopholes that open the door to more tax avoidance. If Ministers fail to monitor such avoidance activity properly, I fear that this will be just one more tax relief to add to the 948 on the NAO’s list of unmonitored tax expenditures, to use the Treasury’s own phraseology. Considering that the scheme came into being last September, can the Minister produce any more up-to-date estimates, based on Treasury data, to build on the OBR’s original forecast? If he is not able to do that today, hon. Members will want to vote for new clause 11 to ensure that that information is available to the House, that monitoring is taking place and that we can all see the potential implications of the Government proposal.

The Chancellor’s flagship shares for rights scheme has been rejected by businesses. It may have opened up a tax loophole that, according to the OBR, will cost the Exchequer £1 billion. For what gain? That is what people are asking. That is what the Government need to demonstrate in their response today, or certainly in the report that we are calling for. We have said that we will reverse the shares for rights scheme and use the money to contribute to the repeal of the bedroom tax. The bedroom tax is a cost-inefficient policy and we would like to see it reversed. We want the money saved from the damaging shares for rights scheme to be used to ensure that that can be achieved without any extra borrowing. We have urged the Government to abandon their ill-thought-through shares for rights policy, which the director of the IFS aptly described as having all the hallmarks of another tax avoidance opportunity, never mind the former Conservative employment Minister, Lord Forsyth, accusing it of having the trappings of something thought up in the bath. So far, Ministers have failed to listen; or at least, they may be listening but they are not hearing.

We have tabled new clause 11 to try to provide much-needed clarity. Officials and Ministers dismiss out of hand as unrepresentative take-up figures disclosed in FOI requests. OBR forecasts are dismissed as not taking account of all the facts. Indeed, the Government’s own measures are dismissed as being unreliable or uncertain. Why will Ministers not step up to the mark and disclose exactly how many employees have signed up to employee shareholder contracts and have been awarded the £2,000 in return for shares? Why will Ministers not disclose the value of shares that have been issued under the shares for rights scheme to date? Instead of labelling Opposition amendments as unnecessary and as an administrative burden, which I anticipate the Minister will, why will the Minister not instead today tell us exactly how much the scheme is costing the Exchequer as a result of the capital gains tax exemptions? How much of that cost is as a result of tax planning arrangements; people capitalising on a poorly thought through policy that could quite easily act as a tax avoidance mechanism, rather than the great stimulus to entrepreneurship and employment that the Government claimed it would achieve?

It is bad enough that this divisive policy totally undermines the concept of employee ownership and workplace rights, not to mention the potential millions lost in tax avoidance activity; but worst of all, Ministers are plainly refusing to disclose the information that would enable Members properly to assess and scrutinise what the scheme has done to achieve the Chancellor’s clearly stated aim of helping businesses to recruit more people.

For all those reasons and given the concerns set out by my hon. Friends, I urge hon. Members to support our new clause 11, so that we can get the facts straight on shares for rights.

Before the soothsayers and the sketch writers say again that Labour is anti-something or other, I want to make something quite clear. [Interruption.] The sketch writer is in the Gallery, although perhaps I am being a little arrogant to think that anyone would want to report on one of my speeches. Before the press releases go out from Tory central office saying that Labour is anti-share save schemes all of a sudden, I want to make it clear that this party has always been in favour of shares to reward people for the work they do.

The best and most successful companies offer shares to their most successful employees. Indeed, I would like to draw the Minister’s attention to how successful a share save scheme can be by using the example—a Welsh example—of Admiral Insurance. In March 2013, it recorded a 15% increase in profits. In all, 6,500 members of staff at the Cardiff-based Admiral Group will get £3,000 in an employee share save scheme. Alastair Lyons, the chair, said at the time:

“I want to thank everyone who has helped us to create such a robust business”

in the past 20 years. People are more productive, happier and more contented when they are valued and, above all, when they feel valued. That is why the Admiral Group of companies are among the top 100 best places in the UK to work, which I am sure did not come about by trading in employee rights for shares.

Sometimes it seems that this Government are so intent on presenting some sort of radical, compassionate conservatism that they fumble around for an idea, before coming back to ideas that have failed time and again. Very often, it seems that this Government, like previous Tory-led Administrations, are fearful of employment rights, and I am not the only one saying that. According to even the independent Office for Budget Responsibility—if I may digress, Madam Deputy Speaker, the Government are resisting requiring that very body to audit all parties’ manifestos at the next general election—the flagship shares for rights scheme has been rejected by businesses, opened up a tax loophole and will lead to £1 billion being lost by the Exchequer. In the face of such criticism, it seems eminently sensible to support our amendment for it would compel the Treasury to report on the take-up of shares for rights, collect data on the scheme and publish further reports on shares for rights every year.

Is there not a contradiction between the argument that the scheme will lose billions and saying that it is being taken up by nobody?

I have the utmost respect for the hon. Gentleman, but he should allow me to develop the argument a bit further. As he knows very well, this is a Finance Bill, and the Opposition cannot move any amendments that relate to spending. A report is the only thing we can propose, and it would be eminently sensible. If we had the data, we would know what the uptake was. I would argue that the Government have to abandon their ill thought out “shares for rights” policy, which even the director of the Institute for Fiscal Studies described as having

“all the hallmarks of another avoidance opportunity”.

My hon. Friend the Member for Newcastle upon Tyne North (Catherine McKinnell) alluded to the Conservative employment Minister Lord Forsyth who described it as having

“the trappings of something that was thought up in the bath”—

by the Government on their own, I hope, although we don’t know with Tory sleaze! It is bad enough that this divisive policy undermines the concept of employee ownership and workers’ rights, but it could also cost the Exchequer up to £1 billion, a quarter of that arising from tax planning activity—the very tax planning activity that the Chancellor said he had clamped down on since he took office.

Fundamentally, the problem that employees have faced over the last 40 years with the end of heavy industry—it is a problem that comes with Governments of all stripes—is that most feel insecure in their jobs anyway. People do not have a job for life any more; they move around seven or eight types of jobs, but slashing employment rights at work is wrong in principle. It will not help create jobs and growth. It seems to me that this is a policy made up on the fly.

If anybody wants to know how ill-conceived this policy is, they need only look at some statistics. The scheme has not won the support of the business community. A 33-week consultation on the scheme—two thirds of the year, or nine months—had more than 200 responses. Of those, only five businesses said they would be interested in taking up the scheme.

I sometimes think I admire the Chancellor. He is an economist—of the highest rank, I have no doubt—but I wish he were here to explain how he came up with the line:

“Owners, workers and the taxman are all in it together”.

Where was the sense in that? It is just not fully worked out. Has he not asked the employer? If an employer has a bad employee, why would he want to give them shares and make them owners of the company? That does not make sense to me. The employee would then have voting rights over what the employer wanted to do. Why would an employee want shares in a company that had just dismissed him? It should be easier to hire than fire.

We need tax breaks for small businesses so that they can hire extra employees rather than throw away their employment rights. As a proud Labour and Co-op MP, I support employee ownership, but coupling it with slashing employment rights is contradictory and counter-productive. As the Employee Ownership Association has pointed out, boosting employee ownership

“does not require a dilution of rights”.

Even a city on the hill, the United States of America, where employee rights are certainly not in fashion, has criticised the scheme. The proposal reflects the “fire at will” recommendations of the controversial Beecroft report, authored by the Prime Minister’s employment tsar and Tory donor, Adrian Beecroft. Mr Beecroft admitted to MPs that his proposals were based not on any statistical or empirical evidence but on a “valid sample of people”. Who has he spoken to? No doubt the same Tories who have problems with the employment rights of anybody anywhere.

The scheme could also present considerable costs to business and create new administrative burdens. I believe that people are already being deterred from taking up the scheme. Alan Higham told The Guardian:

“I worry it would create suspicion among employees that I might sack them unfairly. Employees wouldn’t easily be able to see the value in the shares today…If I employ 10 staff and decided to give them £2,000 each of shares, then I would need to spend £10,000 in getting a professional valuation done. Under current tax rules I would also have paid them £2,000 each to change their contract, on which PAYE and national insurance would be charged. As this is a gift I would also have to pay tax on this. On this basis it could cost me £10,000 and a further £9,400 to give away £20,000 of shares. There will probably also be some sort of ongoing admin and HMRC compliance to do, which will also cost.”

Fundamental questions must be asked about this entire scheme. If the company goes bankrupt—if the employer is so bad that he runs his company into the ground—does the employee he has just sacked become responsible for any of the company’s losses? If the employee has shares in the company, of course he will.

Ministers are seeking to introduce this scheme without proper consultation and discussion. They have proceeded in a shambolic and chaotic way. That is reflected by the fact that the Second Reading of the Bill that became the Growth and Infrastructure Act 2013 took place before the consultation had closed.

Given that £10,600 of capital gains tax is already exempt, exemption from CGT in the scheme is only likely to benefit employee shareholders in a small minority of companies which achieve unusually high growth. There is also concern about the full cost of the scheme. Ministers originally claimed that it would be £100 in 2017-18, but according to the Office for Budget Responsibility’s contribution to the Treasury’s policy costing document, which was released along with the 2012 autumn statement 2012,

“the cost is expected to rise towards £1 billion”,

and the OBR concluded that

“uncertainties are around assumptions on take up rates, the average value of shares that are entered into the scheme, the extent of tax planning and the timing of disposals.”

What really concerns me is that a person could throw away all his employment rights in return for shares that could already be tumbling. There is no win-win situation for such people.

According to the Office for Budget Responsibility, a quarter of that £1 billion additional cost—£250 million—is expected to arise from tax avoidance as a result of the scheme. A Government who have been obsessive about tax avoidance seem to be creating another vehicle for people to avoid taxation. Following the publication of the Government’s response to the consultation scheme, a Government source was quoted as saying:

“The proposals are on life support.”

However, Ministers went ahead with them. I wonder whether this Minister knows who that person was, and whether he can enlighten us.

It seems to me that the scheme is unworkable. When “shares for rights” were discussed during the Committee stage of the Growth and Infrastructure Bill, the Minister of State, Department for Business, Innovation and Skills, the right hon. Member for Sevenoaks (Michael Fallon), admitted that employees taking part in the scheme could be liable to pay income tax and national insurance on any shares received from employers over and above £2,000. That would impose a significant up-front cost on employees.

It is feared that there are other ways in which the scheme could have an adverse impact on employees. For example, will jobs be advertised as available only with employee shareholder status? In practice, will employers be able to impose the scheme on individual employees or groups of employees? What safeguards will there be to ensure that the scheme is voluntary for existing employees, as Ministers claim that it will be?

On behalf of the members of the Employee Ownership Association, chief executive lain Hasdell sent an open letter to the Under-Secretary of State for Business, Innovation and Skills, the hon. Member for East Dunbartonshire (Jo Swinson), who is responsible for employment relations, consumer and postal affairs, expressing concern about recent developments in the Government’s approach to growing the number of employee owners in the economy. He said:

“'Our Members have three main concerns on this matter.

Firstly, proposed legislation has appeared in a Bill before the Government consultation on the possibility of deploying this model of employee ownership has finished. Indeed it has only just started.

Secondly, our Members are very aware that there is no need to reduce the rights of workers in order to grow employee ownership and no data to suggest that doing so would significantly boost the number of employee owners. Indeed all of the evidence is that employee ownership in the UK is growing and the businesses concerned thriving, because they enhance not dilute the working conditions and entitlements of employee owners.”

In that context, I remind the House of what I said about Admiral Insurance in Cardiff at the beginning of my speech. Iain Hasdell continued:

“Thirdly, the appearance of this measure in the Growth and Infrastructure Bill appears to our Members to be completely disconnected to the recommendations in the Nuttall Review. That Review contained a series of recommendations on how to grow employee ownership and none of those recommendations suggested the dilution of worker rights.”

I am not the only person who is saying these things, and that is why I believe that we should have a report. The criticism of this measure has been immense, from the business community and employment organisations to trade unions—some Members on the Government Benches will probably think I have sworn there. The Employee Ownership Association says:

“whilst growing employee ownership should be part of the UK’s Industrial Policy, such growth does not require a dilution of the rights and working conditions of employees.”

Brendan Barber, TUC general secretary, said:

“We deplore any attack on maternity provision or protection against unfair dismissal, but these complex proposals do not look as if they will have very much impact, as few small businesses will want to tie themselves up in the tangle of red tape necessary to trigger these exemptions.”

There, in a nutshell, is the problem: there is low take-up; it is very complicated; people are not interested. As my hon. Friend the Member for Newcastle upon Tyne North said, we see maternity provision, a hard-fought right that many people argued and fought for and in some cases gave their lives for, being given up for the whim of a few shares in a company that could be either taken over or finished in a couple of years.

Mike Emmett, employee relations adviser at the Chartered Institute of Personnel and Development, says:

“The UK has one of the least regulated labour markets in the world and there is little evidence to suggest that employment regulation is preventing small businesses from taking people on. In fact, according to the Government’s own research, unfair dismissal doesn’t even figure in the list of top ten regulations discouraging them from recruiting staff. Employees have little to gain by substituting their fundamental rights for uncertain financial gain and employers have little to gain by creating a two tier labour market.”

My hon. Friend is making a very eloquent and provocative speech. Does he agree with me that it is intrinsically wrong for someone to sell their rights, just as it would be intrinsically wrong of me to sell myself into slavery? Is this not going down that absurd and immoral path?

I do not know how much my hon. Friend thinks he would get if he sold himself into slavery—[Interruption.]

Order. Thankfully, that matter would be out of order to discuss. Therefore, any embarrassment that the hon. Member for Swansea West (Geraint Davies) might feel is spared.

Thank you for that interjection, Mr Speaker, and I am sorry that I treated such a serious topic as slavery in a light-hearted manner.

I agree with my hon. Friend: these are hard-fought employment rights. I do not want to hark back to the past, but although the Conservatives like to say theirs is a progressive party, every piece of social legislation in this country, from votes for women to increased maternity and paternity rights to the minimum wage and even the state pension, has been brought about by Labour and by people having to fight for them. To me, it seems frivolous for those rights to be given away. As a former trade union official working in financial services, I do not believe that people were deterred from employing staff because of the rights they had. Maternity rights are accepted across the board. If someone goes on maternity leave, people believe they have that right, and it is shocking that the Government think this can be sold off for 30 pieces of silver.

John Cridland, director general of the CBI, said:

“I think this is a niche idea and not relevant to all businesses,”

again backing up my argument that this is policy made on the fly. It has not been thought out. It seems to me that the share schemes and share save schemes work very well without people having to trade their employment rights. Employers who have introduced a share save scheme or given shares to their employees do so as a reward for good business practices, not to buy off potentially bad employees.

There is a little thing that we should learn in this House: it is called trust. If an employer asks me to sell my rights, I will straight away be suspicious; I will always work hard, but I will not be industrious in the way I should, and I am going to ask myself questions such as, “Is there a question mark over my competence if he is willing to trade my hard-fought employment rights for shares in his company?”

I have sympathy with some of the Labour party’s concerns on this issue, but having listened for an hour or so one thing occurs to me. Does the hon. Gentleman agree that no employee will be forced to do this—they will voluntarily choose to do so or not? That is important.

The hon. Gentleman is taking a very liberal position, but I refer again to the evidence given during the Committee stage of the Bill that became the Growth and Infrastructure Act 2013, which introduced the measure. It was said there that employees who took up the scheme would have to pay income tax and national insurance on any share received from employers over and above £2,000. The scheme would impose significant up-front costs, so I do not know whether it would be so voluntary. I have criticised Adrian Beecroft about his anecdotal evidence, but I wonder what would really happen in the workplace. We know of so many tribunal cases where people have been harassed or been under severe strain from an employer and then gone on long-term sick leave. What is to prevent the employer from forcing them to sell those rights?

My hon. Friend raises an important point, but the intervention by the hon. Member for Eastbourne (Stephen Lloyd) does not take account of the fact that many employees are in a very vulnerable position with their employers. If they are approached by their employer to take this up and they turn it down, what happens? What situation are they left in? There are an awful lot of question marks over how the scheme works in practice and where the equality of arms is for the employees potentially affected by the scheme.

My hon. Friend advances the argument eloquently. We debate these issues and talk about employment rights, but if someone is in a poor workplace, is struggling to pay the rent or the mortgage and the bills, and faces a severe threat that they might lose their job, they might be forced into doing this. In many non-unionised businesses there will be nobody to police this, so those people might be forced into it. She powerfully made the point about how women, in particular, are in that type of situation.

I should have made my next point before the hon. Member for Eastbourne (Stephen Lloyd) intervened on me, but I will do so now. Paul Callaghan, partner in the employment team at Taylor Wessing, has said:

“Osborne is potentially forcing all new employees to waive the main employment rights including unfair dismissal and redundancy rights in exchange for £2,000 of shares. This makes Adrian Beecroft’s fire at will proposals look moderate.

From April it may become the norm for job offers to require this waiver which will also involve the loss of flexible working rights and stricter maternity rights. This is likely to have a disproportionate effect on women.”

Henry Stewart, founder and chief executive of the training company Happy Ltd, has said:

“I welcome anything which makes it cheaper and simpler to give employees shares, but coupling it with taking away employment rights is ridiculous. If as an employer you have a problem with unfair dismissals, you need to improve management—that’s what the government should be giving incentives for. I don't think it's been thought through.”

In a nutshell that sums up what I think of this proposal. Bad employers who are afraid of unfair dismissal cases, reprisals, recrimination and grievances from employees should think about how they are managing their staff and look hard at their human resources department.

Corey Rosen, founder of the National Centre for Employee Ownership, one of the world’s leading groups promoting share ownership, has said:

“There is a lot of employee ownership in our country, but not one of these employees and not one of these plans asks employees to give up any employment rights to get any of the various tax benefits associated with employee ownership.”

That is a voice from the United States, not somewhere known for being particularly friendly to those in trade unions or on employment rights.

Simon Caulkin, writer on management and business, has said:

“In effect, Osborne's cobbled-together scheme is a back-door re-run of the agenda of…Beecroft”.

Rebecca Briam, partner at Gannons Solicitors, said:

“It is unlikely to get off the ground.”

With only five businesses out of 200 wanting to take up the scheme, I think she is right. She goes on to say:

“The proposals will be unpopular with employees because the chances of benefitting are so slim.”

She said that it was

“unpopular with employers, especially privately controlled companies, because of the risks imposed to the share structure. Far from saving on payroll expenses, the total costs for an employer may well increase.”

Manufacturers’ organisation EEF said:

“Our members have indicated they would not implement the new status.”

The Federation of Small Businesses said:

“The scheme is unlikely to be appropriate for many small businesses.”

The Chartered Institute of Personnel and Development said:

“There is very little evidence as to why this policy is needed or what impact it will have.”

Such views support the new clause that is before us.

Earlier, I talked about the vehicles that are created for the purpose of tax avoidance. Matthew Findley, partner at law firm Pinsent Masons, addressed that matter quite eloquently. He noted that the income tax positions of those receiving the shares is still unclear:

“There is nothing in what the Government has said so far that would stop senior executives or substantial shareholders from participating in the arrangement. This may mean that an opportunity still exists for such individuals, even if they may be viewed by some as the ‘wrong’ people politically to benefit.”

Paul Johnson from the Institute for Fiscal Studies talked about the potential for tax avoidance as the scheme

“prepares to put another billion pound lollipop on the table.”

He says:

“Just as Government Ministers are falling over themselves to condemn such behaviour, that same Government is trumpeting a new tax policy which looks like it will foster a whole new avoidance industry.”

An avoidance industry is something of which a Government who want to create jobs cannot be proud.

I support new clause 11. As there has been such a low take-up of the scheme—only five in 200 companies have said that they would consider it—a report needs to be produced. Numerous commentators from the business community have expressed the fear that a new tax avoidance scheme is being set up, which suggests that this is a pertinent and sensible new clause, and I urge the Government to accept it.

I am pleased to follow the hon. Member for Islwyn (Chris Evans), who spoke with great authority, drawing as he did on his experiences as a trade union official before he was a Member of Parliament. I will, if I may, draw on some of my own experiences of working with small businesses. In that regard, I draw Members’ attention to my entry in the Register of Members’ Interests.

I apologise to the hon. Member for Newcastle upon Tyne North (Catherine McKinnell) for missing the beginning of her comments. I thought that she spoke persuasively and eloquently about some of the issues and about the policy that the Government have introduced. She had me persuaded all the way, until she referred to the spare room subsidy as a tax. It is just not a tax, and it is such a shame when bad slogans happen to good people because all the persuasion power of their speeches is lost. The rest of her speech raised some important points.

We should put the new clause into context. The Government have an extraordinary long-term economic plan that is delivering improvements to the economic lives of my constituents in Bedford and Kempston. It impacts on their ability to find work and get into work. It also raises their average weekly earnings, which is a major concern for many people. It is good to see the plan starting to bear fruit.

Perhaps now is not a good time for an ordinary Tory Back-Bench Member to criticise the Government, but if my hon. Friend the Minister will forgive me, I will do so. We are looking here at a policy in search of a problem; we are not really looking at something that will have a dramatic impact on the well-being of our businesses or our employees. I am open to being persuaded by the Minister. He usually persuades me and I am sure that he will do so today, but perhaps I could go through some of my experiences from when I was in business relating to two parts of our debate.

On the one hand, we have employee and workers’ rights and, on the other, we have employee shareholdings. The approach seems to be to conflate those two issues into one policy and I am not sure whether that will ultimately prove to be wise. In my experience as an employer, although employees’ issues in employment sometimes concerned the extent of employee rights, red tape and regulation often led to far more concerns about the impact of government on the business. In addition, the problem was not necessarily the rights per se but the complexity of the regulations. For a small business, just understanding the regulations to comply with them causes problems. I am not sure that the problem was specifically the rights that were given to employees. Is the objective in this case to reduce the complexity of regulation for businesses through the use of the combination of employee shareholdings, or is there some other objective?

The hon. Member for Islwyn mentioned some of the issues when companies give shares to employees. For a large part of my life, I have worked with technology businesses and the provision of shares was a norm for business. It was a way in which many companies could afford to start, to grow and to prosper. In those circumstances, people were given shares not because of their employee rights but as an incentive either to reward effort or to encourage effort to promote the success of the company. It was also a matter of the trade-off of rewards. Many small companies did not want to use the cash they got from investors to pay high or market rates to their employees and wished to defer that by providing people with the opportunity to have shares to share in the ultimate long-term success of the business. That is a tremendously powerful model for many sectors, not just the technology sector but other sectors of our economy, in that people are willing to trade off immediate returns for long-term rewards.

When we consider other ways to think about compensation, which will, I think, be a growing issue over the next five years, we must consider how to encourage people to defer some of their compensation until later in their lives. I can understand how the promotion of employee shareholding helps with short and long-term rewards, but my concern is that combining that with employee rights means that clarity might be lost. Rather than being given a positive impression about why we are encouraging employees to become shareholders, people will instead ask whether there is a catch. It should be absolutely clear that there is no catch when people are being offered shares. This is clearly an issue of deferring compensation from period x to period y.

I am concerned that, as I have said, this is perhaps a policy in search of a problem. As with so much that Government do, we will see unintended consequences. If the new clause is targeted at small businesses, we must remember that the Government have other options at their disposal. Just a week or two ago, the Centre for Policy Studies produced some very positive policies about abolishing corporation tax for very small businesses and abolishing capital gains tax for investors. To my mind, that would have more of an impact on encouraging more entrepreneurial businesses. We have recently seen news about the merger of national insurance and income tax, which would alleviate some of the burdens and complexity for business in managing employees.

When I visit small businesses in my constituency, I am sometimes quite shocked that, say, one person out of 10—a large proportion of the staff—has to spend all his or her time dealing with regulations and sorting out the problems they cause rather than getting on with making money.

My hon. Friend speaks from great experience and is, as usual, exactly on the point. For many small business people, the biggest constraint is time: they have to be the sales person, the accountant, the HR person and the form filler. The policy that has given rise to new clause 11 is supposed to be helping those people, but I think there are many other ways we can support our small businesses that would have a greater impact.

One of those is that the Department for Business, Innovation and Skills should lose its great focus on a grand industrial policy, centred on our large corporations, and start to show a bit of passion about our small businesses. I know that the Secretary of State is a good friend of the Treasury Bench—obviously, he is a member of it—but somehow we are not getting the focus and heart for our small businesses that we should be getting, and it would be good to hear that voice coming through louder and clearer.

I am drawn by Opposition Members’ eloquence on the questions they are raising about this policy. It did not occur to me at the start of our support for the policy that it was going to be a big policy that would have an impact on many businesses. I would be interested to hear an update from the Minister on where the policy is taking us and what our goals are when it comes to promoting employee shareholding. What are his concerns? Does he share my concern that, in trying to put together promotion of employee shareholding and reductions in employee rights, we may be failing to make progress on two issues, rather than making progress on both?

It is a delight to follow the hon. Member for Bedford (Richard Fuller), who spoke with such authority about his work now and previously with small businesses. It was a pleasure to serve with him on the Finance Bill Committee, where generally he spoke loyally from the Government Benches on his party’s agenda, even though he disagrees slightly with the policy before the House now. It is also a pleasure to follow my hon. Friend the Member for Islwyn (Chris Evans), who spoke articulately and ably, using his experience as a former trade union official.

I believe that shares for rights as it has been proposed lacks common human dignity. We know that the main purpose of Government is to protect individuals, communities and their property from exploitation and harm; Government must also provide a stable economic, social and legal framework for businesses and economies to thrive. The proposal does not do that. As I mentioned earlier, Lord O’Donnell described shares for rights as a form of modern-day slavery. It creates a two-tier market and a two-tier work force—one part having sold its rights and the other retaining them. I think that that is wrong for our economy.

The policy was announced with great fanfare in 2013, but the shares for rights scheme cannot be described as anything other than a massive flop. It is also proving to be another bone of contention in our fractured coalition. The Under-Secretary of State for Business, Innovation and Skills, the hon. Member for East Dunbartonshire (Jo Swinson), and the Secretary of State are nowhere to be seen near the proposal. The real problem, though, as the Chancellor has found, is that it has been impossible to get employer organisations to back the scheme. As my hon. Friend the Member for Newcastle upon Tyne North (Catherine McKinnell) said, according to the most recent information we have—hopefully, the Minister will update us—there were 19 expressions of interest by December last year. The Office for Budget Responsibility says it could be used as a tax dodge, costing us—the Treasury—nearly £1 billion a year. In this age of austerity, that is the last type of policy we need to be introducing.

Ministers seek to introduce the scheme without proper discussion, and without proper consultation, as my hon. Friend the Member for Islwyn said, and have proceeded in what can only be described as a very chaotic way. Following the publication of the details of the scheme, a Government source was quoted as saying that the scheme was on “life support”, but Ministers still went ahead. As was mentioned earlier, John Cridland, director-general of the CBI, said that this was a niche idea that businesses really do not want. There is unanimity among people who really care about employers and their rights and those Opposition Members who believe that employees should also be shareholders and work hard in their small and medium-sized enterprises, where most employees now reside.

Does my hon. Friend think it is just a coincidence that the vast majority of the FTSE 100 companies also find themselves in the list of the top 100 best places to work in the UK, and they have not rolled back employment rights in any way and have successful share save schemes, as I mentioned earlier?

The best organisations offer benefits in kind, which can be shares to their employees. I and many in the House have no problem with that.

This measure is wrong for business and wrong for employee-business relations, and I urge all hon. Members to support the new clause.

I apologise to the House for not being present at the beginning of the debate. The previous debate finished slightly earlier so there was a clash with something else that I had in my diary. However, I want to make a few comments on this because it harks back to new clause 14, which we debated earlier. All we are looking for in new clause 11 is some transparency on this policy. We know it was introduced with great fanfare by the Chancellor at the Conservative party conference last October when he said:

“Workers of the world unite.”

The conclusion to the workers of the world uniting was that everyone united against this policy.

This is incredibly relevant to the Finance Bill because it has created a significant tax loophole. On new clause 14 on the 50p tax rate and the need for transparency on how much tax that takes, the Government said clearly that 45p brings in more tax at the top rate than 50p, which brings in less because of tax avoidance. In this case, we are looking at the biggest tax avoidance measure we can get. It has been described by the Institute of Fiscal Studies as a billion-pound tax lollipop on the table. If we are serious about tackling such tax avoidance, it would be great for transparency, not just for the House but for the country, if a report were produced showing take up and the consequences of that.

Because it is such an important prospect, we need to look at what the Chancellor tried to do in his conference speech. We will end up in the situation where people are able to sell their rights for a few pounds that might be worth nothing. That is not the kind of working society that we want. It is not the kind of partnership that we want between employers and employees and trade unions, whereby people can sell their rights for maternity pay, unfair dismissal, and all those rights referred to by Beecroft in his report for the Prime Minister. We now have a fire-at-will culture, which does nothing to dispel the Government’s move towards a hire-and-fire culture with this proposal. There are the hallmarks of another tax avoidance scheme. Why on earth would we want to produce a scheme that not only allows people to sell their rights and not be covered by any employment rights, but to be in a situation whereby those at the top end of businesses can use these mechanisms to avoid paying tax? I hope that the Minister can address some of those serious concerns when he replies.

I cannot understand why the Government would not accept new clause 11 if they are so confident that this measure will be well used, resulting in a transformation in entrepreneurship, with people hiring more and more employees because they do not have what the Government would call the burden of employee relations. Why would they not want to produce a report showing how many people are using the measure? I do not understand why they do not want to produce a report showing the impact on the Treasury coffers, through capital gains tax and any other tax receipts that might be lost.

It is important for the Government to have confidence in their proposals. The Chancellor was confident when he announced it with great fanfare. I am not sure whether it will have any take-up, because of the way it has been presented and the message it sends out. Justin King, the former chief executive of Sainsbury’s, said that it sends out a poor message. Many chief executives and business owners say that it sends out such a poor message on the partnership we want in the workplace.

Therefore, if the Government wish to have confidence in their own policies, it is only right that they agree to new clause 11, bring forward the report setting out the take-up and the data collected on the scheme and publish further reports every year. If the scheme is denying people their rights at work at the same time as denying the Treasury valuable income, this House should know about it and be able to debate it so that it can hold the Government properly to account.

As we have heard, new clause 11 would require the Chancellor to review the impact of the new employee shareholder status on tax revenues and to publish a report setting out the impact on capital gains tax receipts, the estimated value of shares owned by employees with employee shareholder agreements and the number of such employees. Let me set out why I believe the new clause is unnecessary—a word the hon. Member for Newcastle upon Tyne North (Catherine McKinnell) rightly predicted would come up, although, to be fair, we have had this debate before.

It is far too early for any detailed information on the employee shareholder status to be available. It has been available only since 1 September 2013, and we have not yet reached the deadline by which companies must submit their annual share scheme returns covering that period. Therefore, the Government do not yet have full information about the use of the new employment status. Once received, it will take time to process and analyse those data. The Government set out the potential impact on tax revenues in our tax information and impact note for the employee shareholder tax reliefs, and there are currently no additional data available that would allow that to be updated.

In addition, it is not necessary for a requirement to publish information to be placed in legislation. HMRC publishes a wide range of information about employee share schemes with no such statutory obligation. For example, only last week it published a wealth of data on the use of the tax advantaged employee share schemes during the year ending 2012-13.

We will consider whether that type of publication is appropriate for employee shareholder status or whether a different approach might better enable an evaluation of the employee shareholder status. As the Government have made clear, the employee shareholder scheme is different from the existing tax advantaged employee share schemes. It is primarily designed as an employment measure to encourage choice, growth and flexibility over the long term, rather than being focused on tax advantages. We will want to take those broader factors into account when evaluating the policy. However, given that employee shareholder legislation has been in operation for less than a year, it is simply too early to be finalising any details in that area.

I certainly accept the Minister’s point about the timing for reporting back on the scheme. However, we are starting to see examples of the very few companies that are taking it up, and they seem to be focused on high earners in industries such as private equity, who arguably are not very worried about their employee rights anyway. For example, eight managers at European Capital each received the maximum £50,000 recently when they sold one of their businesses. Can the Minister say what kinds of companies are registering and how the scheme is working so far?

We have been consistent throughout. No one argues that the arrangement is right for everybody; it will be suitable only in particular circumstances. It is more likely to be relevant for fast-growing areas involving a relatively small number of highly valued individuals who benefit from arrangements that incentivise performance but who are not necessarily looking for extensive employment rights.

It has been said before in the context of this debate that there are employees who benefit in full from employment rights; there are the self-employed, who have essentially no rights in this area; and there is a gap in the middle. Part of the thinking behind the arrangement is about ensuring that something appropriate falls in between—something useful for fast-growing small and medium-sized companies that want to create a flexible work force.

I appreciate the intervention just made by the hon. Member for Redcar (Ian Swales). The issue is surely not one of employment flexibility; it is about maximising tax advantages. The policy has been announced on the basis of allowing companies—particularly high-growth technology companies—to employ people on a more flexible basis, but the example just given by the hon. Gentleman goes completely against that. That shows that the scheme is being used for tax-avoidance purposes.

I do not accept that. As far as avoidance is concerned, the tax reliefs are intended to encourage the take-up of employee shareholder status by individuals when that is offered to them. However, those reliefs are not an end in themselves. A number of rules in the legislation will prevent abuse of the new status while keeping it as simple as possible for employers and employees to use. For example, there are rules that will stop people with a material interest in the relevant business exploiting the tax reliefs for their or their families’ benefit. We will always keep the matter under review. As I said, if we see any abuse, we will act. However, we believe that we have put in place rules that protect the Exchequer from such tax avoidance.

I want to say a little more about take-up. My hon. Friend the Member for Rochford and Southend East (James Duddridge) made a good point: the argument is simultaneously that no one is making use of the scheme and that the scheme will cost a lot in tax avoidance. There is something of a tension between those two positions.

We decided not to introduce a pre-registration or pre-approval system for those wishing to make an employee shareholder agreement. The Office of Tax Simplification has told us that HMRC pre-approval of share schemes is outdated and time consuming for businesses. Data on employee shareholder status will therefore be picked up from companies’ annual share scheme returns to HMRC. As I said, the scheme has been in place only since the beginning of September 2013, so we have not even reached the deadline by which companies must submit their returns to HMRC for that period. It is far too early to finalise any details of publication.

Given the widespread concern expressed about the scheme, is the Minister’s position—that the Government will just wait and see—not incredibly complacent? When the returns come in, the scheme may prove to have been one big tax avoidance opportunity, but the Government seem perfectly relaxed about that.

No, that is not the case. As I said, when the original legislation was passed, protections were put in place; a moment ago, I gave an example of one designed to prevent abuse. We will continue to monitor the issue. As with all activities, if evidence of avoidance emerges, the Government will be determined to act, as we have time and again.

On the data on employee shareholders and on take-up, a question raised by a number of hon. Members, I am simply seeking to explain that I am not in a position to give the information that the hon. Lady and others have asked for because we have not required pre-approval or pre-registration for the scheme. That point is also relevant to the FT figures on take-up that have been mentioned. As there is no need for companies making use of the employee shareholding scheme to contact BIS in advance and there is no registration or approval system, we do not expect BIS to have a definitive list of all those companies that have made use of the scheme. That is why I am not in a position to give that information to the House and why the figures that were used by the Financial Times should not necessarily attract a huge amount of excitement.

The scheme is a new facet of our employment practices. It is probably unfair to judge a scheme such as this in its first few months because it will need time to bed in before there is wider knowledge about it and it is more widely used. As I have said, I am not in a position to provide information at this point.

I am grateful to my favourite Treasury Minister for allowing me to intervene again. What the Minister is missing is that, according to his Government’s own figures in the Red Book, £1 billion has been allocated to this proposal. Why will he not agree to the new clause, which would allow the House to scrutinise what that £1 billion of public money is being used for? That way we could avoid the situation raised by the hon. Member for Redcar in which people use the scheme to avoid tax rather than as a proposal to create growth and to get more people into employment by denying them their workers’ rights.

It is always a great pleasure to give way to my favourite Member of Parliament for Edinburgh South. In quoting the figure of £1 billion he is somewhat conflating two things. One is the OBR’s estimate of the potential cost of the scheme some years into the future, if a whole set of circumstances apply and we do not take action to deal with any concerns that might emerge. As far as the Red Book is concerned, the published estimates of the annual cost of the measures are £10 million in 2016-17 and £45 million in 2017-18. Those are the numbers and we have no reason to believe that they will prove inaccurate, so to correct the hon. Gentleman for the record, we are not talking about a cost of £1 billion.

New clause 11 would impose an obligation on the Government that is not only unnecessary but, as I have set out in some detail, could not be met given the current availability of data on take-up of the employee shareholder status. Given that the new clause is unnecessary and would be unworkable, I ask the Opposition not to press it.