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Finance Bill

Volume 598: debated on Tuesday 21 July 2015

Second Reading

I must inform the House that I have selected the amendment in the name of Mr Angus Robertson, on behalf of the Scottish National party.

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

As my right hon. Friend the Chancellor set out in the recent Budget, the British economy is fundamentally stronger than it was five years ago. The deficit has been halved as a percentage of GDP; for the first time since 2001-02 debt as a share of GDP is falling; the UK was the fastest growing economy in the G7 in 2014, and we are expected to repeat that in 2015, too. We have more individuals in work than ever before, and wages continue to rise above inflation.

Having come so far, we need to stick to our long-term plan for economic recovery. The first Finance Bill of this Parliament demonstrates this Government’s commitment to continuing the plan to build a productive, balanced and secure economy, which delivers for working people at every stage of their lives.

I shall happily take interventions this afternoon, but let me first set out to hon. Members the order in which I intend to discuss the measures in the Bill. I shall begin by talking about those measures that are intended to support working people through the tax system. Next, I shall set out how the Bill will help put the public finances in order by tackling tax avoidance, evasion, non-compliance and imbalances in the tax system. Finally, I shall talk about how the summer Finance Bill 2015 will take the first steps in implementing measures to improve the UK’s productivity.

I shall begin with those measures designed to help hard-working people keep more of the money they earn, a principle to which this Government are committed. We have a proud record on reducing tax for the lowest paid. As a result of action taken in the previous Parliament, 27.5 million individuals saw their typical income tax bill reduced by £825. This Finance Bill makes even further progress, by increasing the tax-free personal allowance to £11,000 in 2016-17 and to £11,200 in 2017-18. As a result of those changes, a typical basic rate taxpayer will be £80 better off in 2016-17 compared with in this tax year. Further, the higher rate threshold will also increase from £42,385 in 2015-16 to £43,000 in 2016-17—£300 more than the amount announced in the March Budget. That will take 130,000 individuals out of the higher rate of tax by 2016-17.

It is the firm belief of this Government that individuals working 30 hours a week on the national minimum wage should not pay income tax. That is why this Finance Bill will enshrine that link in law for future increases in the personal allowance. Once the personal allowance has reached £12,500, it will always be at least the equivalent of 30 hours a week on the national minimum wage. Until that point, my right hon. Friend the Chancellor will have a legal duty, when setting the personal allowance, to consider the financial impact on an individual working 30 hours on the national minimum wage. This Finance Bill also delivers another legislative commitment to low levels of taxation. It introduces aspects of the five-year tax lock by ruling out increases in income tax and VAT for the duration of this Parliament.

Finally, this Government know that the wish to pass something on to one’s children is the most basic human aspiration. To give hard-working people the security of knowing that they can continue to provide for their families after they have gone, this Bill phases in a new £175,000 per person transferable allowance when a person’s home is passed on at death to their direct descendants. This means that by the end of this Parliament, the effective inheritance tax threshold for married couples and civil partners will be £1 million.

At the same time, to ensure that those with the broadest shoulders continue to bear the biggest burden, this new allowance will be gradually withdrawn for individuals with assets of more than £2 million. This reform will be paid for by cutting down on the £34 billion that the Government spent on pensions tax relief in 2013-14 —two thirds of which goes to higher and additional rate taxpayers. The benefits of pensions tax relief for top earners will be restricted by tapering away the annual allowance for those with a total income of over £150,000 from April 2016.

These are important measures, rewarding and supporting the efforts and aspirations of working Britain—and doing so in a fair and balanced way.

In the previous Parliament, under the previous Government, one outcome was that the wealthiest in the country paid a higher proportion of tax than they did under the preceding Government. Do this Government intend that to continue to be the case in this Parliament?

I can confirm to my hon. Friend that that will continue to be the case. We have set out a Budget that is balanced, ensuring that those with the broadest shoulders continue to bear the greatest burden.

I now turn to the way in which the summer Finance Bill 2015 will help to fix the public finances. We know that the UK’s economic recovery is well established, with growth at 3% in 2014, and continued robust growth for 2015 and 2016, according to the Office for Budget Responsibility’s forecast. But this country needs the economic security of running a surplus, and, if we are to achieve that, a further £37 billion in fiscal consolidation is required over the course of this Parliament. To deliver that, the summer Budget included measures to tackle tax avoidance and tax planning, evasion and compliance and imbalances in the tax system, which will collectively raise £5 billion a year by 2019-20.

This Finance Bill implements a number of those measures. First, it includes provisions preventing private equity and some hedge fund managers from exploiting tax loopholes to avoid paying the full rate of capital gains tax. Secondly, it removes the ability for companies to use UK losses and reliefs against their controlled foreign company charge. That will improve the effectiveness of the UK CFC regime in countering aggressive tax planning by multinational companies. Thirdly, the Bill legislates to stop a potentially significant tax planning risk, whereby corporate groups exploit tax rules for asset transfers between related parties. This puts it beyond doubt that the tax rules cannot be manipulated to prevent profits from being charged to tax.

The International Monetary Fund recently said that developing countries lose £212 billion a year through corporate tax avoidance by multinational companies. Transparency will be absolutely crucial in dealing with that, but the Bill makes no mention of public country-by-country reporting. Will the Government look carefully at that, and at any amendments that might come forward, given that it would enable people in the developing world to see the taxes that companies pay locally for their benefit?

The UK has been instrumental in bringing in country-by-country reporting to tax authorities as part of the OECD’s base erosion and profit shifting project, which will be of great assistance to tax authorities. We want to ensure that developing countries can benefit from that co-operation between tax authorities and from greater use of data. The publication of country-by-country reporting is best approached multilaterally.

But we should all acknowledge the progress that has been made. For example, much more information is now available to tax authorities, enabling them to assess large companies’ tax strategies. One proposal in the Budget earlier this month was to make UK-based multinational companies publish their tax strategies. Such information would help to incentivise behaviour away from aggressive tax avoidance, which Members in all parts of the House wish to address.

Does the Minister accept that the target of £5 billion is really small beer when one considers the amount of tax that many multinational companies, including those that operate here in the UK, avoid paying by moving their profits around?

No, I do not accept that. Indeed, if one looks at Her Majesty’s Revenue and Customs’ tax gap publication, which identifies where the tax gap falls, one sees that, in terms of avoidance and acting contrary to the intention of Parliament, we should not overstate the element that is corporation tax avoidance by large multinationals. It is important that we address it, but one should not believe that it amounts to a huge pot. We have taken a number of steps in this area, some of which are operational. For example, we have supported HMRC to expand its large business service. Again, further progress on that was announced in the Budget. We have introduced the diverted profits tax, which came into force earlier this year. That is a very significant measure to address aggressive tax avoidance. We want to take further steps. Indeed, the base erosion and profit shifting project, which the OECD is running, means that we can hopefully take further steps in future. But those areas are best dealt with on a multilateral basis, and the UK has been very engaged in ensuring that there is progress in that area. I hope that there will be further progress on that front later this year.

Once again, this Government have introduced a Bill that makes it clear that avoidance and evasion by corporates and wealthy individuals will not be tolerated. But fixing the public finances also means that everyone in Britain must pay their fair share of tax. The vast majority of people pay their tax on time and in full, but a small minority of taxpayers refuse to pay what they owe despite having the money to do so. The Finance Bill introduces direct recovery of debts, giving HMRC the power to recover tax and tax credit debts directly from debtors who have debts of over £1,000 and more than £5,000 in the bank.

The UK must remain competitive as a global financial centre, but it is only fair that the contribution banks make reflect the risk they pose to the UK economy. The Finance Bill introduces a new supplementary tax of 8% on banking sector profit, while gradually reducing the full bank levy rate over the Parliament. That will ensure that banks contribute a further £2 billion to the short-term task of deficit reduction, while ensuring the lowest tax rate of banks’ profit in the G7 nations.

In the shift to the new tax on banks, the Government are sweeping in mutual banks, building societies and the smaller challenger banks. That creates problems both in capital accumulation for the mutuals and in the ability of the new challenger banks effectively to gain capital to take on the larger banks. Is that an accident, or has some decision been taken to penalise those organisations?

The first point I have to make is that banks with the smallest profits do not pay the surcharge. There is a minimum level to protect the very smallest banks. The bank levy that was introduced early in the previous Parliament reflected some of the issues that existed at that time. It was designed in part to encourage a different type of behaviour that would reduce risks. Regulatory changes have rather addressed that particular point. The move to a surcharge—a higher level of corporation tax—is sensible and timely given some of the changes that have been made. It is not possible in those circumstances to carve out those institutions that we like and dislike beyond putting in that de minimis level. That was a sensible approach to take.

Perhaps the Minister can clarify the intention of the levy. Is it to continue modifying behaviour? Do we need it because we have concerns about systemic risk, or because we want to close the deficit?

Essentially, it is to ensure that the banking sector, which poses particular risks and which benefits from implicit guarantees, makes a fair contribution to the public finances. I hope that provides some clarity to my hon. Friend.

The Financial Secretary seems to imply that the banking levy, which was developed at the start of the previous Parliament, was essentially an ephemeral need that has now been taken care of by subsequent regulation. Banks have been able to cope with the fact that they have, essentially, a too big to fail subsidy—the VAT exemption. They have been able, with the levy, to absorb record-breaking fines for their own misbehaviour. Now he is saying that that is all to the good and that we do not need that same system of taking from the banks. Surely we do, though. They need to make a contribution to the public purse.

There is no disagreement over the need for a contribution from the banking sector towards the public purse. We have concluded that the better way to make that contribution is through a corporation tax surcharge, and that is what we are introducing. There was also a particular argument in 2010 about trying to influence behaviour, but, to some extent, that has now been addressed by a new regulatory regime. I agree that there is a need for a contribution. What we have here is a new surcharge on the banking sector, which performs precisely that task.

Britain’s insurance premium tax is also well below rates in many other countries, such as Germany, so this Bill proposes an increase to 9.5%. but that applies to only one fifth of all premiums. The Government are also committed to meeting their climate change objectives in a cost-effective way. Over the next five years, the climate change levy exemption for renewable energy is due to cost £4 billion, one third of which would subsidise overseas projects that bring no benefit to the UK. This Finance Bill therefore takes urgent action to stabilise CCL revenue.

Finally, to make the tax system fairer, the Bill restricts the amount of tax relief landlords can claim on property finance costs to the basic rate of income tax. That will ensure that landlords with the largest incomes no longer receive the most generous tax treatment. We are tackling tax avoidance by wealthy individuals and corporates, addressing imbalances in the tax system and taking bold steps to ensure that it remains fair.

The hon. Gentleman made a point a moment ago about the removal of the climate change levy for green energy. Does he recognise that that measure, by being retrospective and incredibly disproportionate to the ends he is trying to achieve, will seriously disrupt the green energy sector? The sector is already massively concerned about that. He talks about the importance of cost-effective measures to reaching green energy outcomes. Onshore wind is one of the most cost-effective energies out there, but his measures are undermining it.

I do not accept that point. Removing this exemption will achieve better value for money in the Government’s support for low-carbon generation by targeting support directly at generators and preventing UK taxpayers from subsidising overseas renewable projects that bring no benefit to the UK. That was the weakness; that was the failure of the existing regime, and it is right that we address it.

I now wish to deal with productivity. As my right hon. friend the Chancellor set out in the recent Budget, the rate of UK productivity has been a historical problem. It is vital to increase our productivity, because that is one of the fastest routes to creating jobs and raising the standard of living for everyone. Earlier this month, we published our productivity plan, setting out how we will tackle this long-term challenge. This Bill implements a number of measures taking this plan forward. A stable tax regime with competitive rates and strong investment incentives is essential to drive productivity forward. In the previous Parliament, the main rate of corporation tax was cut from 28% to 20% as a central part of the Government’s economic strategy. This Bill goes further, by cutting it to 19% in 2017 and 18% in 2020, saving businesses more than £6 billion by 2021 and giving the UK the lowest rate of corporation tax in the G20.

The Minister will know that the Stormont House agreement contains plans to have a lower rate of corporation tax for Northern Ireland, if the Assembly and the Executive so decide. He knows the problems that exist on the implementation of that agreement. Will he undertake to continue to work with the Northern Ireland Executive—with those parties that want to make progress economically in Northern Ireland—to ensure that that corporation tax relief is introduced as quickly as possible?

I am happy to give that undertaking to the right hon. Gentleman. We have always been clear that the devolution of corporation tax was dependent on stability in the finances for Northern Ireland, and I believe we agree on that point. We want to be in a position to implement that policy and I know he is also keen to implement it, but it is dependent on proper progress being made, and I entirely agree with him on that point.

To provide certainty to business and encourage investment in plant and machinery, the Bill also sets the annual investment allowance at the permanent higher level of £200,000. Improving productivity also means prioritising investment in infrastructure.

The reality surely is that the AIA is being cut from the de facto £500,000 per year to £200,000, so it is not an increase. Doing that at the same time as cutting corporation tax runs the risk that firms’ accumulated reserves will be used to buy back shares rather than to go into productive investment, thereby meaning that the productivity growth the Government are seeking will not be achieved.

I do not accept that point. First, the increase to £500,000 was temporary, as we always made clear. Very strong representations were made by business groups that what was important was putting a permanent level in place. We have the highest permanent level ever; at £200,000 it is twice the level we inherited in 2010, at a time when corporation tax rates are substantially lower. This is therefore a much more generous regime than we have had before. Our changes to corporation tax rates are an important measure in encouraging investment. I am sure I will be corrected if I am wrong, but I do not believe it was that long ago that the Scottish National party was advocating a corporation tax rate of 18%. I am sure the SNP is delighted that there will be a rate of 18% across all the United Kingdom.

Before the Minister moves off the issue of support for businesses, may I say that although there are many measures in the Bill to support businesses that we welcome, many of my local small businesses are eagerly awaiting the Government’s review on business rates later this year? Will he give some indication that those small businesses in my constituency will not end up worse off as a result of changes that may be planned to the business rates?

Our record on business rates is that we have consistently looked after the interests of small businesses: we have extended small business rate relief on numerous occasions; we have introduced the rebate for retail premises; and we have made a number of reforms to business rates to assist small businesses in particular, as well as capping increases in business rates. A review is ongoing and I am not going to make any announcement today, however nicely the hon. Gentleman asks me what its contents will be. It is ongoing and the consultation period has only relatively recently finished. We are keen to progress this and we have brought forward the timetable by which we will complete that review; we will have something by the end of the year.

Improving productivity also means prioritising investment in infrastructure. Our road network has suffered from decades of underinvestment. This Bill implements reforms to vehicle excise duty to support the creation of a roads fund. The reforms will ensure that VED still incentivises purchases of the cleanest cars, while putting revenues on a sustainable long-term footing.

The Minister will not be surprised to hear that I completely disagree with him, but it is not just me, as the Society of Motor Manufacturers and Traders also says that this change to VED means that the take-up of low-emission vehicles will be disincentivised. How can that be a positive thing to do? He talks about productivity and in other places about the importance of air quality, but these measures, again, undermine both.

That is an unlikely alliance, but what I say to both the hon. Lady and the SMMT is that there is still an incentive in the first year and the evidence suggests that that is most important in influencing behaviour. There are incentives within the system.

I will give way to the hon. Gentleman; an even more unlikely alliance might be about to be formed with the hon. Lady.

I can assure the Minister that there is not likely to be an alliance between me and the hon. Lady or her party. The revenues will apply to a roads fund for England, but what arrangements does the Minister intend to put in place for the tax that is collected in places such as Northern Ireland and for that money then to be diverted to infrastructure projects for roads in that part of the United Kingdom?

I understand the good point that the hon. Gentleman is making. There will be a need for discussions with the Northern Ireland Executive to ensure that we reach a sensible conclusion to reflect the various requirements across all the United Kingdom. I hope he appreciates that we understand the point he is making.

Through backing businesses and supporting infra- structure investment, this Bill will take important steps to boost our productivity, creating growth and prosperity for all.

Before I conclude this speech I would like to comment briefly on the Government’s tax policy making process. At the start of the last Parliament, the coalition set out its ambition to improve the tax policy making process, through high levels of consultation and legislative scrutiny. That approach was welcomed by tax professionals, and I am delighted to inform the House there have been real achievements. More than 150 formal and informal consultations on tax changes took place over the past five years, and our commitment to publish the majority of Finance Bill clauses in draft was met. I can confirm that this new approach will continue into this Parliament. Indeed, since the recent Budget, we have already published more than 10 consultations on tax policy proposals for future Finance Bills. I should also add that we are establishing the Office of Tax Simplification on a permanent footing as from today, and I am delighted that we are able to do that.

The Finance Bill before us today, at the start of the new Parliament, sets out the priorities and direction of this Government. Our direction is simple: towards stability and prosperity. The Bill rewards work and supports aspiration through lower taxes for working people; helps fix the public finances by tackling avoidance, evasion and imbalances in the tax system; and takes important steps in improving the UK’s productivity. I am delighted to commend it to the House.

I am grateful to the Minister for his comments on the measures set out in the Bill. It is a somewhat strange Finance Bill, because many of the most contentious measures announced in the Chancellor’s emergency Budget are not actually in it. Indeed, the Bill is almost as significant for what is not in it as for what is. It is important to reflect on that, and on the fact that the Budget exposed a real difference between the Chancellor’s rhetoric and the reality of what he is delivering, particularly for ordinary working people in our country.

It was certainly not the Budget, and this is certainly not the Finance Bill, that working people needed. The Institute for Fiscal Studies has told us that 3 million working families will be around £1,000 a year worse off. The Budget clearly leaves working people worse off. Despite what the Minister has said about productivity, as a package it fails the test of building a more productive economy to bring down the deficit in a more sustainable, stronger and fairer way.

The Bill does not provide for the contentious changes to tax credits, which the Minister and I have debated several times already over the past week or two, or the reduction in the work allowance and the increase in the taper rate, which will hit working people on middle and lower incomes. We discussed those changes during Treasury questions this morning, particularly the high marginal tax rates that people who earn just above the personal allowance threshold and are currently in receipt of tax credits will be facing. I understand that those changes will be made by delegated legislation, which we expect later this year. They will be hotly debated and opposed, because choosing to make 3 million working families £1,000 a year worse off is the wrong choice, regardless of how the Government try to dress it up.

The Bill also does not set out the changes to the minimum wage. Despite what the Minister and the Chancellor have been saying over the past week or so, what the Government have announced is not a real living wage.

My hon. Friend makes an important point. Just because the Chancellor calls an increase in the national minimum wage—welcome though that is—a national living wage does not make it “the” living wage. Is she as concerned as I am that the IFS has said that it is arithmetically impossible for the increase in the national minimum wage to match the losses that will result from the changes to tax credits?

My hon. Friend is absolutely right. The Government have been busily trying to claim that the changes to tax credits will result in no real change because the new national living wage, which is effectively only an increase in the national minimum wage, will make up for that. The IFS has made it clear that that is arithmetically impossible. That is a pretty damning indictment of the messages that the Government have been trying to put out since the Budget on 8 July.

I feel for the hon. Lady, because she has only one Labour Back Bencher here to support her—perhaps because the de facto Opposition are now the Scottish National party. On that specific point about the national living wage, which she calls an enhanced national minimum wage, will the Labour party be supporting or opposing it?

It is quality that counts, rather than quantity, and Labour Members will show their true quality, as opposed to those sitting to my left—literally to my left, that is—on the SNP Benches. We will of course support the measures that will bring in what is effectively the new national minimum wage, but it is important to expose the fact that it is not, in fact, a living wage. The living wage is calculated on the assumption that there will be full take-up of tax credits, which is exactly what the Chancellor has cut. Given the cut to tax credits, the real living wage will be significantly higher than anything the Chancellor has set out. The effect of his decision is that in 2016 he will be offering the people of this country the 2011 living wage. That is an important point to get on the record. That is why the IFS has said that compensating ordinary working people for the loss of their tax credits with the changes on wages is arithmetically impossible.

Does the hon. Lady share my concern that while many under-25s will lose their tax credits, they will not be covered by the national living wage? On the one hand they will have money taken from them, and on the other hand the compensatory element will not be available to them, so work is certainly not going to pay for that group.

The hon. Gentleman makes a really important point. Taken alongside the changes to student maintenance grants and other measures, the Budget will leave young people, particularly those from poorer backgrounds, worse off. It will have a real impact on their life chances. As those measures are brought forward, it is important that we keep holding the Government’s feet to the fire on the impact they are having on young people.

Changes to the national minimum wage are normally made by statutory instrument, but given the change in the name—the Chancellor’s rebadging exercise—they might need to be done by primary legislation. I would be grateful if the Minister explained how the Government will go about making those changes. If primary legislation is needed, I am rather surprised that the changes are not set out in the Bill. It would be good to have the Government’s further comments on that.

The Bill contains nothing more on productivity, notwithstanding the Minister’s comments in his opening speech. Solving the productivity puzzle is absolutely imperative if we are to experience much stronger economic growth and get the deficit down more fairly. The Conservatives’ record on productivity is one of failure, given the difference between productivity in our country and in our competitors’ economies. I am afraid that the Budget simply offered more of the same.

Despite the Chancellor’s boasts, the Office for Budget Responsibility has revised productivity down next year, the year after, the year after that, and the year after that. His belated productivity plan was simply a patchwork of existing schemes, rather than a substantial reform to boost skills, business growth and wages. The Bill should also have included legislation on big infrastructure decisions, which the Government appear to have ducked.

To tie the issue of productivity, by which I think the hon. Lady means the record on labour productivity, to that of tax credits, does she feel that there is an argument to be made that the widespread nature of tax credits during the last recession played a significant role in the willingness of workers to job share and accept reduced wages in order to maintain themselves in employment, because they knew that the state was going to top up their income if it fell? Therefore, although I support the changes to tax credits, research is still needed into the beneficial impact they can have on maintaining employment in times of recession.

The hon. Gentleman raises a very important point. When we debated tax credits before the Budget, I discussed, I believe with the hon. Member for Brighton, Pavilion (Caroline Lucas), the way in which, in the last recession, tax credits assisted people to remain in work—to accept a reduction in hours, knowing that they would have the safety net of tax credits to help them through that difficult time. More research is needed; the Government should have looked at the way in which tax credits have assisted people. There is a real danger in removing tax credit support from people without having already embedded into the economy the high-skilled, high-paid jobs that we all agree are needed. If our economy had been transformed—if the Government had brought forward proposals that meant that vastly larger numbers of people were in higher-paid work—there would be no need for tax credits and it would be possible to move to a system where we could phase out or decrease the support.

A modern economy needs a modern infrastructure, but the Government have pulled the plug on electrification of the railways. They have pulled the rug out from under investment in renewable energy and flunked the decision on airports. I was interested to see that the Home Secretary was very willing to take on the hon. Member for Uxbridge and South Ruislip (Boris Johnson) when it came to water cannons. The least the Chancellor could have done was to take on the hon. Member for Uxbridge and South Ruislip when it came to the decision on airports. It would have been good to see this Finance Bill at least start that process.

My hon. Friend knows that several Greater Manchester MPs have already voiced their concern about the pause of the electrification of the line between Manchester and Leeds, not least because that is absolutely crucial for the economic growth that we need across the Greater Manchester and west Yorkshire “northern powerhouse”, as the Government like to call it. Does she also appreciate the frustration of Greater Manchester MPs that the only mention under the heading of “infrastructure” in the Budget was a plastic Oyster-style card to use on our Pacer trains?

My hon. Friend raises an important point. The northern powerhouse has very clearly got a power cut, and it remains the case that with changes to local government funding, we cannot empower local government and local people if we impoverish them. At the same time, there remain important critiques of the Government’s policy making in this area. He is absolutely right that the Budget, the Finance Bill and all the attendant documents that were published on 8 July certainly did not go far enough on infrastructure, and the example that he gives powerfully highlights that.

Can the hon. Lady confirm that it was put on record during the election campaign that if Labour had formed the next Government, they would have cut infrastructure projects in my area, such as funding for the A27?

Infrastructure projects must be proceeded with on the basis of an economic case, and that was the underpinning of the announcements that we made during the election campaign, but it is also the case that under the hon. Lady’s party, infrastructure spending is down compared with 2010, and she should accept that the record of her Government and her party on infrastructure post-2010 is certainly nothing to write home about. A Government who were really serious about narrowing our productivity gap would be majoring on infrastructure. They certainly would not be kicking big decisions into the long grass for party political reasons and because of leadership ambitions, especially when it comes to airport expansion.

I assume that the hon. Gentleman will be backing the Chancellor of the Exchequer, whom he so loyally sits behind whenever we debate the economy.

The Budget and the Finance Bill have not lived up to some of the most pressing needs in our economy, and instead have actively imposed a work penalty and what can only be described as a living wage con. We will abstain on Second Reading. This is a relatively short Finance Bill, and we support a number of its measures, including raising the personal tax allowance threshold and the increase in business investment, particularly in respect of the annual investment allowance. We will want to scrutinise some of the other measures in much greater detail. We are concerned about the impact of some of the Government’s decisions, so we will return, especially in Committee of the Whole House, to issues on bank taxation, the climate change levy and the insurance premium tax.

I am grateful to the hon. Lady for informing the House that the official Labour party position is to abstain. Will she clarify: is she speaking for her Back Benchers today, because it does not always follow?

That was not quite the cutting put-down that the Minister might have envisaged. That is our position, and that is what all our party will be doing today.

Given that the official Labour party position on the important Welfare Reform and Work Bill yesterday was to abstain and that its position on this Finance Bill is to abstain, can the hon. Lady clarify that it is the intention of the loyal Opposition to abstain on every major piece of legislation in this Parliament?

That question probably sounded more cutting in the development in the hon. Gentleman’s mind than in the delivery. [Interruption.] The hon. Member for Dudley South (Mike Wood) chunters from a sedentary position. He is welcome to intervene on me if he so wishes. I will be delighted to give way to him.

I say to the hon. Member for Bedford (Richard Fuller) and others that abstaining on Second Reading, as he well knows because he is a veteran of debates on Finance Bills, both in Committee and in the Chamber, does not mean that we will not press matters to a vote later in the Bill’s passage. Indeed, on the second sitting day in September we will be considering the Bill in Committee of the Whole House, where we will have tabled amendments, on which we will be voting, on other important measures including bank taxation, the climate change levy and the insurance premium tax. We can all have a lot of fun then when it comes to voting on amendments and debating them at great length.

We will be abstaining on the reasoned amendment tabled by the Scottish National party. There are measures in the Bill that we definitely support. There are other measures that we wish to return to when the Bill receives detailed scrutiny in Committee of the Whole House and in Public Bill Committee, and we shall return to those issues and press some to a vote. On others, we will table probing amendments to gain greater understanding of the Government’s detailed intentions.

The Opposition Front Bench were saying similar things yesterday about the Welfare Reform and Work Bill, but they supported and tabled a reasoned amendment, so it is possible to abstain on a Bill but support a reasoned amendment. What is wrong with the reasoned amendment that would prevent the Opposition from supporting it?

I do not want to get into a tit-for-tat debate with the hon. Gentleman, but the SNP did not support our reasoned amendment last night. In my opinion, the measured and sensible way to take the Finance Bill forward, as we have done with previous Finance Bills in the previous Parliament, is to scrutinise it in detail. There are more opportunities with Finance Bills because we have Committee of the Whole House as well as the Public Bill Committee, and we shall press important measures in the Bill to a vote when we reach the latter stages of the Bill’s passage; but given that there are very important measures that we do support, it is important that we signal that by allowing the Bill a Second Reading.

One issue to which we will return in Committee of the Whole House is bank taxation. The Government will decrease the rate of the bank levy from January 2016 and will at the same time introduce a surcharge on profits of banks over a threshold of £25 million, which represents a switch from a tax on balance sheets to a tax on profits. Those measures are contained in clauses 16 and 17.

We will debate those in detail in Committee of the whole House in September, when we will seek to increase transparency regarding revenues from the banking sector. We will also push the Government for further details about the impact that these measures will have on the diversity of the financial sector, including any disproportionate impact on building societies. That is one of the things that people have been warning about since the measures in the Bill were unveiled.

As the Institute for Fiscal Studies has highlighted, by 2021 there will have been 13 tax rates in 10 years as the bank levy is gradually reduced from 0.21% to 0.1% by January 2021. This measure will cost £1.8 billion from 2021 onwards. Because from 2021 UK banks will be taxed on liabilities in the UK and not worldwide, that represents a fairly significant giveaway that it is important to test further in Committee. In contrast to what is happening to the bank levy, the 8% corporation tax surcharge, in effect, on bank profits from January 2016 raises £1.3 billion. There are a number of questions on the rationale for moving to this form of taxation for banks, as well as on the original intention of the bank levy and whether that will continue to be met in the new regime. It is important that hon. Members have the chance to test this further in Committee. The Minister will know that the bank levy was designed to discourage risky leverage, but whether it has been successful in doing so is a matter for some debate. Moving to a system of having a tax on profits possibly introduces a risk that there may be some discouragement from declaring UK profits. It will be important to analyse what risk that might pose in the banking sector.

There is a particular problem with regard to challenger banks, which were not subject to the bank levy but will fall within the new surcharge. Challenger banks are important for the overall health of the financial sector, because we need them to challenge the dominance of the big four or five banks. The Government will say, rightly, that the £25 million threshold is partly designed to prevent too much of the impact from being felt by challenger banks. Nevertheless, the Government will also be aware that a lot of the commentary since publication of the proposals has focused on the genuine concerns of challenger banks, which are worried that despite the £25 million threshold, they will still be disproportionately affected, with a significant impact on consumer choice as well. We will need to look at those issues further.

I am grateful for the shadow Minister’s confirmation that she and her party support much of what is in the Bill. Will she confirm that she agrees with its general direction, which is fundamentally towards an economy characterised by higher wages, lower taxes and less welfare?

I will shortly turn to insurance premium tax, which is a very significant tax-raising measure that the Government have not been quite as keen to trumpet as other measures in the Bill. As I said at the beginning of my speech—I am not sure whether the hon. Gentleman was in the Chamber—it is significant that most of the very contentious changes in the Budget, particularly in respect of working tax credits, are not in the Bill but will be made in delegated legislation Committees. I dispute the Government’s characterisation of these measures, because I believe that they will leave working people worse off. That is not necessarily directly relevant to all aspects of the Bill, but it is relevant to the overall package of measures introduced in the Budget.

There is serious concern about the impact that the 8% surcharge will have on building societies. Of the six main building societies—Nationwide, Yorkshire, Coventry, Skipton, Leeds and Principality—only Nationwide currently pays the bank levy. Based on the most up-to-date profit figures from 2014-15, it is estimated that the building societies will pay about £126 million a year through the corporation tax surcharge, equating to about £630 million up to 2020. The building societies point out that the primary way in which they build their capital is through retained profit, so a tax on profit has a disproportionate effect on them. Moreover, they do not have shareholders, unlike public limited companies, so this is, in effect, a tax on the customers who own them—retail savers and mortgage borrowers. It will be important for the Government to explain their thinking on building societies and what analysis there is of how these changes will play out for them in practice.

The next key issue that we will return to in Committee relates to the climate change levy. Clause 45 removes the climate change levy exemption for renewable source electricity generated on or after 1 August 2015. I am afraid that this is another example of the Government undermining investor confidence in renewable energy. They have already tried to halt the development of the cheapest form of clean energy by pulling the plug on onshore wind, and this continues that trend. It would be fair to say that since taking office they have put placating their Back Benchers’ more strident views about renewable energy generation above the jobs and investment that would be created across our economy if we were genuinely able to move towards a low-carbon economy.

We will particularly seek to push the Government on a suggestion by the Chartered Institute of Taxation that they produce a road map, as they have done previously on aspects of taxation policy—in particular, corporation tax policy—setting out their plans for the future of environmental taxes to help the renewable energy industry, and business more generally, to take long-term investment decisions. That could be an important way for the Government to set out their intentions for the life of this Parliament and for us to test whether they mean it with regard to charting a course towards a low-carbon economy for our country.

Insurance premium tax, as I said in response to the hon. Member for Gloucester (Richard Graham), is a significant revenue-raising measure. Clause 43 increases the standard rate of the tax from 6% to 9.5% with effect from 1 November 2015, raising £1.6 billion. There are very important questions about the distributional impact that that will have and whether those on middle and low incomes will bear the brunt of the increases. It is interesting that the Chancellor did not focus on the very significant revenue-raising measures in his Budget. Indeed, the rhetoric and narrative that he has been pursuing suggests that it is a Budget of giveaways. He will not be surprised that we will not let him get away with that characterisation.

Insurance premium tax has been described as a stealth tax. Ministers will be aware that several industry figures have warned that increasing it could prompt policyholders to buy less cover, possibly exacerbating problems caused by under-insurance, particularly with regard to car insurance. Again, we will wish to test those areas further in Committee when we will look carefully at any analysis by Government of the possible impact on under-insurance. The AA has said that insurance premium tax on the average car insurance policy is equivalent to a fuel duty increase of almost 2p per litre, so either way drivers are being hit in their pockets. I would be grateful if the Minister commented on the measure’s overall distributional income, what conversations the Government have already had with the insurance industry and what this means for future changes to fuel duty.

As I have said, we support other measures in the Bill, particularly the so-called tax lock both for income tax at the basic, higher and additional rates, and for VAT. I remind Treasury Ministers that, back in 2009, the current Chancellor was very critical about Chancellors passing laws to ensure that they fulfil the promises they make in general election campaigns, and I think that that criticism applies just as much to him now. However, we support the principle of the lock. We have pledged not to raise VAT, national insurance or the basic and higher rates of income tax, so we welcome those measures.

I commend my hon. Friend and the shadow Treasury team, because that particular lock would not have been introduced were it not for the valiant efforts of Labour Front Benchers in the run-up to the last general election in highlighting that the Government would probably have to raise VAT or other taxes. She has already described some of the stealth taxes that have come to fruition since the election.

My hon. Friend makes an important point. I wonder whether we would have the tax lock had it not been for the VAT bombshell poster we unveiled or for the exchanges at Prime Minister’s questions ahead of the general election. Ministers were certainly very quick to write such a law, and despite the Chancellor having suggested in 2009 that passing laws to ensure promises on taxation are kept was a very bad idea, he was very quick to convert to that cause. Nevertheless, they are passing a law on the tax lock. It was Labour party policy, and we are very pleased that we pushed the Conservative party into our territory in agreeing that the rates for ordinary people on lower and middle incomes should not go up.

Another change we support is on the annual investment allowance. I am pleased that the direction of travel has been set out for the whole Parliament. That contrasts very strongly with what happened during the last Parliament, when lots of chopping and changing on capital allowances definitely undermined business investment. Even if the deal is less generous, with a decrease from £500,000 to £200,000, it is important that businesses at least know that the deal they are going to get will last a lot longer than it previously did.

As my hon. Friend the Member for Denton and Reddish (Andrew Gwynne) has mentioned with respect to the expected changes on corporation tax, there is a lack of concrete proposals for business rates. The Financial Secretary has raised expectations and hopes of real change on business rates when the consultation is finally unveiled later this year. We will certainly look at whether the business rates burden will come down for small and medium-sized companies.

The hon. Lady mentioned corporation tax. The Bill includes measures to reduce it first to 19% and then to 18%. Will the Labour party support those reductions, oppose them—after all, that was its position—or abstain?

As the Financial Secretary knows because we have already had such an exchange—I feel we are reliving our greatest hits—on a number of occasions in the past couple of years, our policy at the general election was our manifesto commitment not to go ahead with the corporation tax cut from 21% to 20%. We would not have gone ahead with that additional cut to 20%, but instead used all the money to pay for a cut to business rates this year and a freeze next year. It was a direct switch spend. We wanted to make a commitment to small and medium-sized businesses in our country to do something practical on business rates, but we needed to find a way to pay for that, and we chose to switch-spend in respect of the additional corporation tax cut. We of course lost the election, and the Government are proposing a further decrease of the corporation tax rate. We will support the corporation tax measures, but we will ask questions about what that means for the future direction of travel.

Following an intervention, the Financial Secretary mentioned the BEPS project. On corporation tax more generally, it is important—given how some companies seek to shift profits and game international taxation rules—to have international agreement. Concern has already been expressed in some quarters that some of the countries with which we need to do business and with which we need to agree international tax rules might start to see us as a tax haven. I disagree with such a characterisation, but there is such a risk in getting agreement within the OECD BEPS process. I would welcome it if Treasury Ministers could, in Committee, provide further details about what is happening and about how our friends in the BEPS process are reacting and responding to the Government’s proposal on the headline rate of corporation tax.

One measure we have already voted against relates to inheritance tax. Clause 9 introduces an additional residence nil-rate band for inheritance tax when a home is passed to the direct descendants of the deceased on or after 6 April 2017. The provision, which runs to more than 400 lines, is extremely technical, but it in effect allows parents to pass on a house worth £1 million to their children free of inheritance tax. We have made it clear that the focus of tax cuts should be to help people on middle and lower incomes and to tackle tax avoidance. The Treasury has admitted that 90% of households will not benefit from the Government’s inheritance tax policy. Their priority should be to help the majority of families and first-time buyers struggling to get a home of their own, rather than a further cut to the rate of inheritance tax at this stage.

I must say that I am listening to the hon. Lady with a degree of sadness. Last night, we saw the Labour party abstain on welfare. Today, Labour Members are yet again failing to provide an effective opposition to this Government. Is it not time that they came across to our Benches and to SNP Members, who are providing the real opposition that Labour Members are failing to provide?

The hon. Gentleman rather forgets that the Scottish National party is not a national party; in fact, it is committed to breaking up our Union. If he and his colleagues aspire to be an official Opposition, they may wish to stop being a party of only national interest and stop trying to break up our country. We did not merely abstain on the welfare Bill. As he well knows, we voted for our reasoned amendment, which is exactly what his party plans to do today. If that approach was not good enough for us yesterday, why do he and his colleagues think that it is good enough for them today?

If the hon. Gentleman has been listening to my now very lengthy remarks, he will know that I have gone through the Finance Bill and the Budget in detail and made it very clear that the Bill does not contain many of the most contentious of the Chancellor’s Budget decisions. We will debate and oppose such measures when they are brought before the House as statutory instruments, but those measures are not in this Bill. I have laid out in depth our approach to all the different measures in the Bill, including those that we support and those on which we will ask further questions and to which we will table amendments, which we will vote on, as the Bill continues through its stages in this House.

The Government have published further changes to the direct recovery of debts from bank accounts and in relation to carried interest. That has excited some interest in the inboxes of Members’ email accounts with the campaign by 38 Degrees. We had a manifesto commitment in respect of carried interest. I am not sure that the Government’s proposals in the Finance Bill go as far as we were hoping to go, had we been elected. As I say, we will test the detail in Committee.

In short—sorry, I mean “in conclusion”, as I have been on my feet for a while—many of the most contentious elements of the Budget are not in the Finance Bill. It contains a mixture of measures that we support and measures that we will return to in great detail when we get to Committee of the whole House. I look forward to debating with Ministers as the Bill progresses through the House. I hope that in winding up, the Minister will deal with some of the questions that I have raised in respect of bank taxation, the climate change levy and insurance premium tax.

It is a pleasure to follow a Minister and a shadow Minister who, although it will not surprise you to hear that I agree with one rather more than the other, Madam Deputy Speaker, always speak with passion, clarity and a deep understanding of and care for the issues that we are debating.

It is a pleasure to speak on a Finance Bill that has responsibility, security and the delivery of one nation policies at its heart. It is an ambitious Finance Bill that seeks fundamentally to reform our national finances and create a new settlement for the country. It sets out a clear plan to move Britain from the low-wage, high-tax and high-welfare economy of the past to a higher-wage, lower-tax and lower-welfare society, ensuring that those who work hard, do the right thing and take responsibility are able to get on and have their aspiration rewarded.

To working people and those who can work, the Bill says, “We will take more of you out of tax. Our new national living wage will ensure that you get a decent day’s pay for a decent day’s work, but fewer taxpayer-funded benefits.” The Budget says to businesses, “We will support you to grow through lower taxes but, in return, you must play your part, pay people more and help train our young people for work.” Doing that means taking tough decisions and not being diverted from a long-term economic plan that is working.

Let us not forget the scale of the Chancellor’s achievement over the past five years. His inheritance in 2010 was employment down, housing starts down and GDP down. The only things that were up were borrowing, debt and deficit. Since 2010, employment has gone up by 2 million, the economy has grown, GDP is up by about 3% and the deficit has been halved. Much has been done, but there is much still to do to ensure that, as a nation, we live within our means and spend only what we can afford.

This Budget package—it is a package that must be viewed as a whole with the other measures that we have debated in recent weeks—sets out the plan to finish that job and ensure that our economy remains stable and strong in the years ahead, better to weather any future global economic storms. Key to that is the welcome road map to the elimination of the deficit in this Parliament and the transition to a budget surplus by 2019-20, which will allow the UK to start paying down its national debt. The ambition to further reduce Government spending to 36% from about 40% of GDP is laudable. The state should always seek to take only what it needs in tax, and no more.

This package will help deliver another 1 million jobs by 2020, projected growth of higher than 2% per annum, a raised tax threshold to ensure that those who earn least keep more of their hard-earned money, cuts to taxes on business to deliver growth and a national living wage to ensure that work always pays. In parallel, the deficit and debt reduction will be achieved. The package requires spending in areas such as welfare to be reduced to make sure that we live within our means, but in a way that ensures that the overall package will see a majority of working families better off.

One aspect of the Finance Bill that I want to touch on in a little more detail is the tax avoidance and evasion measures that the Minister mentioned. We believe in a low-tax economy, but one in which people and companies pay the taxes they owe and contribute their fair share. Between 2010 and 2015, the last Government did more than any previous Government to tackle tax evasion and avoidance. I am pleased that the Finance Bill continues that important work. I see from tables C.3 and C.5 of the Red Book that tax receipts are projected to grow. While I am sure that much of that flows from the growth that our national economy continues to enjoy, I hope that it also reflects the improved recovery of taxes owed. I hope that the Government will continue to close tax loopholes as they are identified and finish the job of putting fairness at the heart of our tax system and, where possible, simplifying the tax system without compromising its rigour.

I strongly support the Finance Bill, which seeks to remake our country and to deliver a strong economy, economic security and one nation. Its individual measures are justifiable and necessary, but taken as a package, the logic and coherence of the Finance Bill and related Bills are irresistible.

The hon. Gentleman talks about logic, but one aspect of the Bill is the removal of the climate change levy exemption for green energy. Applying the climate change levy to green energy production is just about as illogical as one can get. Would the hon. Gentleman care to comment on that?

It is absolutely right that we remove the levy to ensure that, over time, we bring energy prices down and so that we do not subsidise an industry that I do not believe should receive those subsidies.

To conclude, this is a package that rewards work, pays down the deficit and debt, drives growth and productivity, and puts the country securely on track for a secure and stable economic future, with everyone having the opportunity to benefit.

I will not, because I am about to conclude.

This is a Finance Bill that truly reaffirms the position of the Conservatives as the genuine party of one nation and of hard-working people and families.

I beg to move an amendment, to leave out from “That” to the end of the Question and add:

“this House declines to give a Second Reading to the Finance Bill because it fails to address the real economic needs of the country, continues to deepen the social divide between those who have and those who have not, restricts the financial discretion of the Scottish Government over its resources, fails to tackle the iniquity of the Scottish Police and Fire and Rescue Services being unable to reclaim VAT, creates unintended consequences for small challenger banks and building societies whose capital comes from retained profits, removes the exemption from the climate change levy of renewable energy resources and, in combination with welfare changes announced in the Summer Budget 2015 and inheritance tax changes, takes from people on low and middle incomes and gives to the very richest.”

I am proud to lead for the Opposition. I felt sorry, in many ways, for the hon. Member for Birmingham, Ladywood (Shabana Mahmood), as she sat there amidst the gathered masses of five Labour Members, which have now declined to three. I noticed that the Minister managed to attract 12 interventions, only one of which was from Labour.

Paying attention? That would be a good idea for the Labour party. You mentioned quality. If you stopped chuntering and listened, you might get a bit of quality.

We are going to do something that the Labour party has refused to do, which is to test the Finance Bill. The hon. Lady spent the first 12 minutes of her speech talking about other things because she said that there was nothing of any great substance in the Bill. I am going to try something rather unusual and talk about what is in the Bill.

I hesitate to be mean-spirited to the hon. Gentleman, but it is obvious from his remarks that he was not listening to my lengthy remarks in which I set out not that there is nothing of any substance in the Finance Bill, but that there are measures in the Bill that we support and measures that we have further questions about. That is different from the Budget, which contains measures on which we have a very real difference of opinion with the Government. We will test those when they come before the House in delegated legislation Committees.

Order. I let the hon. Gentleman get away with it the first time, but now that he has done it for the second time, I must point out to him that when he says “you” he means me, not the hon. Lady. I am quite sure that he is addressing his remarks not to me, but to the hon. Lady.

My apologies, Madam Deputy Speaker.

Our amendment starts by stating:

“That this House declines to give a Second Reading to the Finance Bill because it fails to address the real economic needs of the country”.

As I sat through the Budget speech last week—in growing incredulity, it must be said—my greatest concerns were threefold: first, the crude and brutal attacks on protections for the most vulnerable in our society; secondly, the failure to address adequately the challenge of productivity in our economy—despite the remarks of the Minister at the Dispatch Box today, I will try to demonstrate why the Bill fails to address those requirements; and, thirdly, the impact on regional and national economies, not least in Scotland.

On receiving a copy of the Finance Bill and its associated papers, my concerns have not abated. Indeed, through reading the detail in the Bill, further concerns have come to light, and it is therefore my intention—and that of my colleagues—to table a series of detailed amendments in Committee.

Yesterday’s debate on the Welfare Bill exposed many of the negative effects that Government policy will have on the poor, the disabled, the vulnerable, the young, and in-work families. The Finance Bill adds another burden on hard-pressed families who will face a rise in national insurance premiums as a result of the increase in insurance premium tax.

Does my hon. Friend agree with concerns expressed by the British Insurance Brokers Association, which stated that the rise in IPT is actually a tax on protection and will affect behaviour by limiting people from taking on that protection? It also states that that will affect young people disproportionately, and it is regressive in that it disproportionately affects families in lower socio- economic groups.

I agree entirely with my hon. Friend, and it must be a concern that the measure will lead many families not to take out necessary insurance, with those that do placing themselves in further hardship.

Those negative effects on the poor are matched by giveaway proposals for the rich. The extent of the commitment given to the rich is perhaps best evidenced by the fact that the Government devote no fewer than 13 pages of the Finance Bill to inheritance tax, ensuring that many loopholes are possible for the benefit of those with high-value homes. There is even a proposal to increase the allowance each year, based on the consumer price index, and to round that up to the nearest £1,000 in case the poor dears find it hard to cope.

The fact that the Government find it so essential to make changes that benefit holders of great wealth in our society, at the same time as they cut support for the most vulnerable, says much about the moral choices that they make. There is also a wider economic cost to such choices. The combination of sucking demand out of local economies by penalising the poorest in our society, combined with the largesse bestowed on the wealthy —who will no doubt find ways of spending or saving that do not benefit local economies—makes the simple point that the Government care more about rewarding their friends than about fixing the economy.

Let me move on to the Government approach to very high earners, who for years have found ways of avoiding and evading tax. I admit that I liked some of the Chancellor’s rhetoric during his Budget speech about closing tax loopholes and ensuring a fairer return from those with high earnings—often, people who earn more than £1 million per year—but looking at the detail in the Bill, it is clear that there is still a considerable distance to travel. For example, much more needs doing to close the so-called Mayfair loophole. It cannot be right that private equity fund managers will be able to continue paying capital gains tax at only 28% on so-called carried interest, rather than income tax at 45%. It is probably not unreasonable to estimate that more than £300 million extra revenue could be gained by tightening the rules in that area alone, and that would enable at least some mitigation of the worst excesses of the Government’s welfare proposals.

The Chancellor is undoubtedly highly skilled politically in his presentation—indeed, in that regard he may have been taking lessons from my predecessor in Kirkcaldy and Cowdenbeath. As always, however, the devil is very much in the detail, and the detail leaves too many loopholes.

Let me now address measures that are necessary to tackle some of the areas contributing to weaknesses in productivity—a matter that the Minister addressed.

If the Government are serious about improving productivity, should they not also be serious about improving capital investment?

Absolutely, and I am glad my hon. Friend raised a matter that I will come to shortly. Investment is critical for productivity in this country.

I am struck by how the detail of the Finance Bill suggests that, rather than addressing key issues in a positive manner, the Government present some highly counterproductive measures on productivity. I and my colleagues initially welcomed some of the changes to the banking levy and the introduction of a surcharge. However, whether through carelessness or incompetence—what I am about to say surely could not be planned—the scope of the changes now captures both challenger banks and many building societies whose practices are very different from those of the big banks. Challenger banks already face additional hurdles compared with the big banks, and as the British Bankers Association has pointed out:

“The surcharge’s disproportionate effect on smaller and challenger banks was evidenced by the resulting fall in their share prices following the announcement, in some instances of over 10%.”

Of more concern to me and my colleagues is that the BBA has estimated that:

“Our preliminary analysis based on modest growth projections across the sector suggests that the contraction in lending could be around £10 billion over five years”.

If there is anything we do not need when trying to boost productivity, it is a contraction in lending, particularly for SMEs. If that was to be the only drag on productivity it would be bad enough, but let me turn to another.

If we are to get sustainable economic growth in this country, we need sustainable growth in bank lending, but the Government’s actions will restrain what is necessary to deliver bank lending growth in this country. What has happened to the £375 billion of quantitative easing that was supposed to do exactly that and increase bank lending? It is another failure of this Government.

My hon. Friend answered his own remarks with his last four words. It has been a failure, and now the Government are also failing on productivity.

As I was saying, the potential contraction of £10 billion in lending is made worse because it is now paralleled by a further planned drop in public sector capital expenditure, as my estimable colleague, my hon. Friend the Member for Dundee East (Stewart Hosie), revealed earlier today in questions to the Chancellor.

I agree with the hon. Gentleman about challenger banks and building societies, but rather than over-egg the pudding perhaps he could explain the mechanism by which £126 million of additional tax taken from those institutions will be multiplied up to a reduction of £10 billion in lending.

It is quite a complicated matter, I am told, and I would be willing to come back to it. I am sure that in one of our many discussions we could discuss precisely why that is, but I was not aware of the precise figure of £126 million that the hon. Gentleman mentions. The contraction in lending, mentioned by my hon. Friend the Member for Dundee East, suggests a loss of almost £5 billion over the next five years in public sector investment. Potentially, that adds up to a cumulative drop of £15 billion in private and public sector investment, and that can only be a major barrier to any chance of improvements in productivity.

Other factors with a direct impact on productivity are worthy of comment too. The ability to innovate is directly related to research and development. I therefore scoured the Finance Bill to see what was planned to boost the investment in company R&D. What did I find? Less than nothing. For example, the only change to R&D expenditure credits is the removal of universities’ ability to claim them. That in itself would not be such an issue if more would be done in other ways to significantly boost R&D expenditure, but that is not the case. Indeed, the Budget speech, and the accompanying Red Book, seemed keener to demonstrate adroitness with smoke and mirrors, rather than clarity and commitment to boosting research and development.

I turn now to the impact of the Finance Bill on Scotland in particular. The Chancellor may be many things, but he is far from stupid. In putting in place an income tax lock, which I admit to thinking is a very clever political trick, he has wisely not included in the lock the setting of bands. He recognises the importance of being able to adjust bands to suit economic conditions. He might find it odd that I wholeheartedly agree with him on that. I am sure he therefore appreciates why the SNP has called for the devolution of all aspects of income tax to the Scottish Parliament.

The hon. Gentleman makes an important point. Would he acknowledge that the Red Book anticipates that receipts from PAYE over the period will increase by nearly 36%? That is faster than the growth in the economy and must be because of movements within bands.

I fully accept that: it is a very good point.

The Chancellor recognises the importance of the bands in terms of tax. Scotland needs full control of all aspects of income tax, so I hope that the Secretary of State for Scotland will learn from the Chancellor in that regard.

Of huge concern to Scotland, and to anyone with a concern for the future of our planet, is the continuing attack by the Government on the renewable energy sector. It would appear that the Chancellor has a bad addiction to carbon. He cannot get enough of it. How else can we explain the fact that the Finance Bill will remove the exemption for electricity from renewable sources? Combined with the Government’s insane attack on wind generation, we can see an attack on renewable energy, an attack on Scotland's economy, and an attack on all those working to take better care of our environment.

Would the hon. Gentleman accept that carbon dioxide is not bad as such? It makes plants grow and allows increased productivity in agriculture. It is a good thing for the agricultural economy.

Climate change is largely man-made and carbon is no friend to the environment in that regard. I am sorry to disagree with the hon. Gentleman. I would add, as the owner of a hybrid car, that it seems perverse to add an estimated £1,000 to the cost of buying a greener car—more confirmation of the Chancellor’s addiction to carbon.

The hon. Gentleman mentioned the “insane attack” on, I assume, onshore wind. In areas such as mine, where people are surrounded by 100 turbines, they are driven literally to tears in my surgeries. They are genuinely concerned about the growth of onshore wind, and what we are saying is that we have reached the limit of onshore wind. We are responding to genuine concerns from real people, and my constituents are not insane for having the concerns they have.

I gently point out to the hon. Gentleman that the area of the United Kingdom that has made most progress in wind generation is Scotland. The Government’s attack pays no regard to the interests of Scotland or the policies of the Scottish Government. We are keen to develop renewable energy, not see it set aside.

Allow me to turn now to an area in which I hope the Government will find it easy to demonstrate some good will towards Scotland. Using the cover of technical consideration, Scotland’s police, fire and rescue services, unlike those elsewhere in the UK, are liable for VAT. However, I see from the Finance Bill that it is perfectly within the power of the Government to make special adjustments to taxation requirements. In part 4 of the Finance Bill, the Government have devoted six paragraphs to the London anniversary games, starting this week. In essence, they are deeming non-resident competitors to be free from the burden of having to pay income tax on earnings. It is even being backdated to 8 July. I am not complaining about that, but I would ask the Government to look again at exempting the Scottish police, fire and rescue services from the burden of VAT, with suitable backdating.

I declare an interest of sorts. My daughter’s partner, Dave, is a retained firefighter in Drumnadrochit in the highlands of Scotland. He often is called out to very difficult and tragic events. It is surely disgraceful that people performing such remarkable services for the community in Scotland should see their service penalised because of a technicality that the Government could easily resolve. If the Government right that wrong, I will be the first to thank and praise them for listening to Scotland. I hope that the Government will indicate a willingness to at least seriously consider an amendment to remove that unnecessary burden on Scotland’s police, fire and rescue services.

I commend the amendment to the House.

It seems slightly rude to intrude on the private squabbles between the Labour and SNP Front Benches, but I am delighted to speak in support of the Finance Bill, which implements many of the measures in the summer Budget.

Last week’s black country day celebrated our region’s industrial heritage, and the measures announced in the Budget will do much to develop the framework for businesses in my constituency and across the country. In Dudley South, many of the businesses that I visit are thriving, whether we are talking about Pressvess, which exports to south America and the middle east, or Mechatherm, which designs and exports foundries all the way to Taiwan. Those small and medium-sized businesses are the lifeblood of our local economy and the driving force behind securing economic recovery, increases in employment and greater prosperity for our constituents. Those businesses and others like them account for 60% of employment and almost half of turnover. The measures announced by the Chancellor a few weeks ago will ensure that such businesses can go from strength to strength and create the new jobs that our communities need—for example, the increase in the employment allowance from £2,000 to £3,000, cutting non-wage costs and making it cheaper to create new jobs and to invest in local people.

One of the first companies I visited as the local Conservative party candidate ahead of the general election makes tools and components for the aerospace and automotive industries. Among the frustrations it voiced to me was that, while it invests large amounts of money, effort, staff time and good will in apprenticeships and in training all its staff from apprentice to the boardroom, other companies seem to want a free ride on the backs of those who invest in that way. I therefore welcome the apprenticeship levy on large firms that the Chancellor announced in the Budget, because it will reward businesses that invest in their workforce and penalise those that attempt to get a free ride.

I am proud that the Government have demonstrated their recognition of people’s natural aspirations. They are on the side of people who want to succeed and make the most of their lives. It is vital that we press ahead with the economic reform we put to the country in the general election in May to ensure we secure the financial stability that safeguards people’s jobs and mortgages.

In the past few years, we have seen spending on out-of-work benefits fall to its lowest level since before the recession. The number of people in work in my constituency, and elsewhere across the country, has shot up. For far too long during the boom years before the recession, welfare spending spiralled. We know that many measures were introduced with the very best of intentions. I do not think anybody would argue with those intentions, but unfortunately it sometimes seemed as though too little thought was given to the consequences of the complexity of the systems being built.

I agree with everything my hon. Friend says about the complexity of the system. Does he agree that in making changes and trying to get away from the laudable aim of reducing in-work benefits, we have to be incredibly careful and ensure that the changes coming in next April do not go too far? I hope that—I am glad Ministers on the Government Front Bench will hear this—as we scrutinise the proposed reductions further, we will perhaps think a little more about the impact some of them could have on some of our working constituents.

I am not sure that that intervention was necessarily directed at me. I agree with much of the sentiment behind it, but we have to be firm in the need to continue with reform while, as my hon. Friend says, being aware of the impact it will have. I am sure, like other hon. Members, he will have his attention drawn to that impact very regularly through his mailbox.

The consequences of the complexity of that welfare system did not help the millions who were trapped within the system, with little hope or opportunity to escape and to progress. It is important that the Government’s reforms continue to support people into work, but it is just as important to make sure that it pays to be in work. The Finance Bill moves the Government another step closer to achieving that goal. Securing our finances and ensuring welfare reform are essential to our long-term economic plan. Enormous progress has been made in the past year and in the past five years. We can see the evidence in our communities and in the employment statistics. There are more than 250,000 more people in work in the past year alone and nearly 2 million more in work over the past five years. The economy is continuing to recover and job creation is booming, which is why the measures in the Bill to secure that recovery are so important.

In my constituency of Dudley South, the claimant count has fallen by 29% in the past year, with 584 fewer people out of work and claiming benefits. Across the west midlands overall, the unemployment rate has fallen more than in any other UK region. This is not just a recovery for London and the south-east. The Government’s long-term economic plan offers the best strategy to ensure that that continues. They have shown that they have the courage to take the difficult decisions needed, and to put the measures in place to support working people. The measures we have already discussed go hand in hand with tax cuts for working people: the increases in the personal allowances rising even further than announced in the April Budget, alongside the new national living wage. A new, higher guaranteed wage will mean an immediate pay rise for 2.5 million people.

Does the hon. Gentleman consider it fair that people under 25 will not see the benefit of that pay rise? The differential between those earning this wage at the 16 and 17-year-old rate and at the 25-year-old rate has now expanded significantly and could have a detrimental effect on their ability to live their lives.

The hon. Lady raises a good point, but she should recognise that while the national living wage will be mandatory only for the over-25s, that does not mean that businesses should not pay young—[Interruption.] When the national minimum wage was introduced, there was a lot of controversy regarding the under-21 rates. The evidence, however, did not back up the idea that employers who were paying the national minimum wage rate for the over-21s were necessarily paying the under-21 rate for 18 to 20-year-olds. I would certainly hope that responsible employers invest in and value their workforce, and pay them accordingly.

The introduction of the national living wage will mean that a full-time person in Dudley South will earn an additional £5,000 in wages during this Parliament alone. The living wage will provide my constituents with the financial security of being able to enjoy higher earnings and a bigger wage packet. The message is loud and clear: the Government want people and businesses to succeed, but while we want the regulation of business to be as low as possible, there is a responsibility on employers, as part of that social contract, not to expect taxpayers to subsidise low wages.

The Government were elected in May because of the prospectus we presented to the electorate, which focused on the future. The Bill continues the strategy that will deliver a more prosperous and more successful future. Only by continuing to focus on our businesses, our apprentices, our jobs and our industries can we deliver for Britain. That is what the Budget set out and what the Bill will achieve. The summer Budget and the Finance Bill build on the success of the past five years to secure a better future for Britain and for our constituents.

As a party that believes in low taxation, we welcome a number of measures in the Bill, including those to take more people out of taxation and allow them to hold on to the money they earn. The changes to tax thresholds, the reduction in corporation tax and the tax allowances to encourage businesses to invest in capital or research and development will contribute to the health of the economy and help to close the productivity gap that concerns Members across the House. We will not be voting for the reasoned amendment because we believe there are positive measures in the Bill and because we disagree with some aspects of the amendment anyway.

We do, however, have a few concerns—we discussed some of them yesterday in the welfare reform debate—including about the impact of removing tax credits from people in low-paid jobs and the Government’s misplaced faith in their being compensated by the rise in the national living wage. Rather than making work pay, the measure will act as a disincentive to work for many people, especially young people, to whom the national living wage will not apply and for whom the reduction in tax credits will result in lower incomes. The Government cannot ignore that aspect of their policies.

The hon. Member for Dudley South (Mike Wood) was optimistic that the gap would be filled by businesses volunteering to pay the national living wage to those not officially covered by it. I sometimes hear Government Members talking about the pressures on small businesses. We cannot have it both ways. On the one hand, we talk about businesses being under pressure and requiring help, including with taxation and business rates, but on the other hand, we say, “By the way, they will volunteer to pay higher wages to those not officially covered by the national living wage.” We cannot gloss over the impact of these changes. I believe the Government are being optimistic about the impact. If it backfires—if many people find themselves less well off in work and work therefore becomes less attractive—one of the key policy objectives of the Budget will not be achieved.

That point is particularly pertinent to places such as Northern Ireland, where, because of low productivity in industry, the preponderance of small businesses and other structural factors, a high proportion of people are employed in low-wage businesses and rely on tax credits to bring them up to a reasonable standard of living.

I am grateful to the hon. Gentleman for giving way. While we are not political friends, we are at least friendly. He started by saying he was in favour of people keeping more of their tax, but then bemoaned the loss of tax credits. Will the loss of tax credits not enable a lack of redistribution by acting as a cover for the rich to keep more of their money and as further camouflage for inequality, especially with inheritance tax being cut for the very wealthy while the poor are losing out? When we say we want people to keep more of what they earn, we have to be sure what we mean. Quite often it is a cover for growing inequality and an opportunity for the rich to keep even more for themselves.

Of course, some of the measures in the Bill will take people out of tax altogether, which I am sure the hon. Gentleman will welcome, and some will take people out of the higher tax brackets, especially people on middle incomes, which I am sure he would welcome too. When I referred to people being able to hold on to their income, I was thinking specifically about some of the measures in the Bill. It would be churlish not to acknowledge that the Government have at least recognised the need to find a mechanism to lift those on low incomes out of tax altogether. Administratively, that is a good thing too. Why tax people and then give it back to them in benefits?

The second issue I want to raise is about infrastructure, and the Minister’s answer to me on that was a bit woolly. I do not know how much will be available in the road fund arising from the tax changes to vehicle licence duty applying to cars sold and driven in Northern Ireland, but it is important—and this seems to be an afterthought—that in those parts of the UK not covered by the road fund, which is available as a result of directing vehicle licence duty to infrastructure projects, there be a speedy resolution with the devolved Administrations to ensure that the funding is available to them to develop the road infrastructure in their own areas.

I am also disappointed that the thorny issue of the extension of the hub airport, whether at Heathrow, Gatwick or wherever, is not being addressed in the infrastructure measures in the Bill. Regional connectivity is important for places such as Northern Ireland. That matter cannot be kicked into the long grass. If Britain is to remain competitive and not lose out more and more to Holland, Germany and France, where they are developing hub airports, it is important that we develop our own infrastructure. In Northern Ireland, we are increasingly worried about slots being lost at Heathrow because of the pressure on the runways there. The first places to look at are the flights coming in from other areas of the UK, but that connectivity is vital to the promotion of industry in Northern Ireland and has been part of the secret of our success with inward investment.

Does my hon. Friend agree that part of the problem has been the preponderance of economic development in the south-east of the UK resulting in massive differentials in prosperity across the regions and nations of the UK? Is that not at the heart of trying to get our nation out of recession and into greater prosperity?

That is exactly right, but if we do not have the proper infrastructure to do that, we will be disadvantaged. A continual theme in this Parliament has been the question of how to ensure that growth is spread across the UK and not concentrated in the south-east of England. One way is to ensure that our infrastructure enables the prosperity generated in the south-east of England to be spread across other parts of the UK.

I am grateful to the hon. Gentleman for giving way again; he is underlining our friendliness. To build on the point from the hon. Member for East Londonderry (Mr Campbell), I wish to say that the hon. Member for East Antrim (Sammy Wilson) is absolutely right about the problem of connectivity with the south-east of England, where the airports are being built. It is not by accident. In the 40 years after world war two, there were bilateral air agreements specifying that planes had to fly into London airports, and we have paid for that. He is right about the Netherlands. The London docks lost out to Rotterdam, and it looks like it will happen again with the air infrastructure. As the chief executive of Schiphol said, it would be a good idea—

The chief executive said it would be a good idea to have a long inquiry, and that is what is happening. It is taking too long.

Madam Deputy Speaker, I hope you will indulge the hon. Gentleman, as it is his birthday today. Therefore, long interventions can perhaps be tolerated.

I would like to make it absolutely clear that there is no precedent for long interventions on an hon. Member’s birthday. However, we are about to rise for the summer recess and the hon. Member for Na h-Eileanan an Iar (Mr MacNeil) made his intervention in such a charming way, and he’s made it.

It will be a very short intervention. My hon. Friend the Member for Na h-Eileanan an Iar (Mr MacNeil) is well enough versed in the procedure of this House to know that this is a debate on a Finance Bill and could potentially go until any hour, if he wanted to extend his interventions or speeches.

That is a very worrying intervention for those of us who wish to get to the airport and go back to our constituencies, and I hope it will not be followed up on later in the debate.

Another issue I want to raise is corporation tax. I welcome the reduction in the rate of corporation tax and also the allowances. This has an impact on Northern Ireland, because as the rate set centrally is reduced, the cost of devolving corporation tax to Northern Ireland is reduced as well. That probably reduces Northern Ireland’s competitiveness vis-à-vis other parts of the United Kingdom. However, as the real target of the reduction in corporation tax is our competitiveness vis-à-vis the Irish Republic, a reduction in the cost of devolution—which can affect either what money we have available in the block grant or, indeed, how far we can reduce the level of corporation tax—is welcome.

We recognise the importance of corporation tax in attracting inward investment. Even though there might be lots of capital allowances and so on, the importance of the headline rate has been shown in the Irish Republic. This is something that we in Northern Ireland wish to implement as soon as possible, although given the way that some of the parties in Northern Ireland, including the Social Democratic and Labour party, have behaved in recent times in respect of the Stormont House agreement, the prospect of devolving corporation tax, with the advantages that it might bring, is being pushed further and further down the line. I hope we will not find ourselves hitting even more problems.

The other thing I wish to raise is the whole issue of taxes on energy. The reasoned amendment talks about the removal of the exemption from the climate change levy on the onshore wind. I accept the argument that the Government have given. Given that many of the companies involved are owned abroad, the tax concession given to them was not benefitting people here in the United Kingdom. We also need to bear in mind not only that there is huge opposition to many of the renewable sources, on the grounds of aesthetics and environmental impact, but that people are becoming increasingly aware of the cost of switching from cheap fossil fuels to expensive renewable energy, in terms of fuel poverty and the impact on industry.

I know that the Member from the Green party gets appalled when we talk like this, but why do we even have a renewables obligation? Why is there an obligation on electricity distributors to purchase from renewable sources? If we were simply depending on market decisions, that would not be done.

I will give way in a moment. Let me just finish the argument.

The renewables obligation is an obligation because the energy is more expensive. Indeed, the Department of Energy and Climate Change’s own estimation is that, by 2020, the cost of paying for expensive renewable energy, more and more of which is coming on to the grid, will be about £190 per household. At the same time, we in this House complain about fuel poverty, when one of the contributors to fuel poverty is the fact that we are orientating ourselves towards more expensive electricity generation. Only last week there were complaints about Tata Steel closing down its plant.

I will give way in a moment.

High-energy users are increasingly finding that the United Kingdom is a place where energy is expensive—it costs jobs, it dips into people’s pockets and it causes fuel poverty. This is an issue that the Government are quite rightly addressing.

I have given way. [Hon. Members: “Who to?”] I have given way to the hon. Member for Na h-Eileanan an Iar (Mr MacNeil).

And on my birthday, too. I am sure that the hon. Member for East Antrim (Sammy Wilson), the gentleman that he is, will of course give way to the Member from the Green party and to my hon. Friend the Member for Glasgow North West (Carol Monaghan).

The hon. Gentleman might find that one of the reasons why fossil fuel is so cheap is the low price of carbon, as a result of which the theory of “the polluter pays” does not apply to fossil fuels. Carbon is priced neutrally at the moment, and when that changes, the real price of fossil fuels versus renewables will become apparent. He mentions the change in the regime, but planning is a large part of that. Finally—this is my final point, Mr Deputy Speaker—the hon. Gentleman talks about the cost of energy in the UK, and the cost of the UK’s energy is actually about the highest in Europe, minus taxes.

Mr Wilson was very worried about the amount of time we are taking—we can go to any hour—and I think Mr MacNeil is trying to see whether we can get to that hour. However, as he knows, as much as I appreciate that it is his birthday, he blew out all his candles on his first intervention. We now want shorter interventions.

Of course, the hon. Gentleman is absolutely wrong when he talks about there being no price on carbon. We are talking about the climate change levy. That is one of the costs of carbon. There is also the cost of the European trading scheme, in which carbon is traded and carbon allowances are given, so of course there is already a cost.

I am grateful to the hon. Gentleman for giving way. I am not sure whether or not it is parliamentary to say that the hon. Gentleman is talking rubbish, but he is talking rubbish. The point is that far greater subsidies go to nuclear power and fossil fuel than ever go to renewables. There is currently a small amount of subsidy going to renewables to bring them to grid parity. They will be there in a year or so. Solar is already there, and it is one of the most affordable sources of energy. I think he should speak about what he knows and not about what he does not know about.

Perhaps the hon. Lady takes a different view of what is small and what is large from what I do, but the £13.6 billion of subsidies that go to renewables do not simply come from the Government. They come from households, who pay for it in their electricity bills. That is why I support the Government’s attempts to remove some of the subsidies that consumers have to pay; £13.6 billion, or £190 per household, is hardly to be regarded as a small sum. My only worry is that environmental levies such as the climate change levy and the EU carbon trading scheme will rise from £5.6 billion this year to £16.1 billion by the end of this Parliament, which will add to energy costs and have an impact on industry and on household bills.

Does the hon. Gentleman accept that on a sunny day in East Antrim, one gets a magnificent view of some of our magnificent onshore wind farms on the west coast of Scotland, and will he concede that the contract for difference on wind energy on shore is lower than that for new nuclear energy?

The right hon. Gentleman compares nuclear energy with renewable energy, but of course we have the option of gas, oil and coal. Before the hon. Member from the Green party becomes apoplectic about the impact of those energy sources, let me point out that some of the drivers in Europe who want to push us towards renewables, especially the Germans, are building coal-fired power stations because they are concerned about their industry and their economy. I welcome those aspects of the Finance Bill, and that is one reason why I will not support the reasoned amendment. I think that the Government are right and we have to redress the balance. We have to ask what is important for the UK economy and for UK consumers.

Finally, I turn to the employment allowance, which is important in drawing people into work and encouraging employers to take on new workers. The uptake in Northern Ireland has been very poor. I do not know whether that is because employers have not had sufficient information or because the scheme has not been widely publicised, but when we are trying to find ways of encouraging further employment, the Government should take that on board.

As I said, we will not support the reasoned amendment. We have concerns about many aspects of the Bill, but we believe that parts of it will be good for the economy generally and in Northern Ireland.

I promise not to take as much time as the hon. Member for East Antrim (Sammy Wilson), but I enjoyed his take on things.

I rise to speak in support of the Bill because the recent Budget set out clearly a better future for this country. In the last Parliament the coalition Government had to turn around the economy that they inherited by turning around a record Budget deficit, public sector net borrowing at a high of 10.2% of GDP and a benefits system which accounted for nearly a quarter of all public spending, which left less money for public services such as our NHS, our schools and our infrastructure. The Budget and the Bill build on that progress. This is a Budget for ordinary people up and down this country, despite what others might say. This is a Budget for workers.

Four key elements support that claim. The Bill reduces personal taxation, so that people can keep more of the money that they earn. It ensures, again despite what others may say, that work actually pays; it is crazy that we inherited a system in which people are better off on benefits than in work. The Bill delivers on housing, and will make it easier for many people to have a place of their own. It also helps businesses, so that we have a thriving economy to pay for our much-needed public services. The Bill supports all those aims.

The hon. Lady said that she would like work to pay. Is she saying that the Institute for Fiscal Studies is wrong when it says that the bottom four, five or six deciles of earners will actually be worse off as a result of the Budget? Surely if work is to pay, it should be paying more, not less.

I wish the hon. Gentleman a very happy birthday. I take his point, but what has been missed from the argument is the raising of tax thresholds that will benefit people, especially those on the lowest wages. I shall come to that in a minute.

The Bill will make important differences to ordinary families. First, it will reduce personal taxation. During the last decade, under the Labour Government, more than 1.6 million people were dragged into the higher rate of tax, including hundreds of thousands of nurses, teachers, police officers, and other public sector workers. Our measures to raise the higher-rate threshold to £43,000 will make a difference to those people and their families. All in all, a basic rate taxpayer will be £905 a year better off. The families who will benefit from those changes are not wealthy; many of them work long hours and commute long distances, and deserve to keep more of the money that they earn.

The Opposition parties believe that the way to reward hard work is not to increase wages or reduce the tax that people pay, but to increase benefits in the form of tax credits. That is what Labour did in government, to such an extent that the welfare bill rocketed, accounting for about a quarter of all public spending. That meant that there was less money for our hospitals, our schools and our infrastructure.

Why are Opposition Members so adamant that the only way to improve people’s lives is to increase their benefits? I will tell you why: because they do not believe in aspiration. They do not believe in the fundamental principle that if people work hard enough, no matter what their background, they can achieve anything in life. A life on benefits is not inevitable, nor should it be the only way forward for working families. Conservative Members support workers by not only increasing the national living wage, which I cannot believe Opposition Members actually—

Does the hon. Lady not accept that using language such as “national living wage” is sinister mischief-making? It is also hugely disrespectful to the Living Wage Foundation, which has set the living wage at £9.15 in London and £7.85 outside.

I disagree. By 2020, the living wage will be £9, because that is the level at which we have set it. For the lowest-paid workers in the country, that has to be a huge advantage. I cannot believe that Opposition Members are actually disagreeing with a proposal to increase the wages of the lowest earners.

The hon. Lady is imputing various motives and feelings to Opposition Members, and is not doing so reasonably. May I point out to her that a living wage that took full account of the take-up of tax credits would be well over £11? The level set by the Chancellor is not that level, which is why this is not a national living wage.

I assume that Opposition Members will support the wage increase for the lowest earners. I am pleased to see the hon. Lady nod in agreement.

However, we are doing more than just increasing the national living wage. We are also reducing the tax that people pay, not only by raising tax thresholds but by freezing national insurance, VAT and fuel duty levels for this year, to ensure that they have more money in their pockets.

Let me now say something about housing. It is, again, the Conservatives who are helping those on low incomes to reduce their outgoings by lowering social housing rents by 1% a year for the next four years. Opposition Members feel that they cannot support that move, and will either oppose it or abstain. That, I think, shows their true measure. However, the Bill goes a step further by ensuring that social housing occupied by people who have done well, and are earning more than £30,000 a year outside London or £40,000 inside London, will no longer be subsidised by hard-working taxpayers who may be earning less than that themselves. Instead, those people will pay market rents—the same market rents that others in the same position pay in the private housing sector.

In addition, to increase the supply of affordable housing, the Chancellor has announced an increase in the rent-a-room relief, which will enable people to rent rooms without having to pay tax that acts as a penalty. The tax relief for buy-to-let landlords will be reduced, too. That will level the playing field for ordinary families trying to get on the housing ladder, who have been in competition with buy-to-let landlords who have previously been at a significant advantage.

I represent what is on paper one of the most prosperous constituencies in Scotland, yet more than 3,000 children in Gordon are in working families who will be worse off as a result of the Budget, and I doubt whether there will be fewer children in Lewes similarly affected. What does the hon. Lady say to the children of working families in her constituency who will be worse off as a result of this Budget?

There are lots of hard-working families in my constituency and if the right hon. Gentleman visits us he can see for himself that they are fed up with having to go out and work long hours often on low pay to subsidise a benefit system that historically has not been there to help such people.

I will not give way; the hon. Lady will be pleased to know that I am almost at the end of my speech so I will continue, if I may.

There are some great measures in this Bill to support businesses, small and large, which have been the engine-room of our economy over the last few years. Cutting corporation tax from 20% to 18% by 2020 will be a huge help to many of them, and the ability to employ four people full-time on the new national living wage and pay no national insurance at all will be a real incentive to them to take more people on. There is also the increase in the annual investment allowance so that companies can grow their business more easily. All this means employers, not the state, will be increasing people’s incomes, so that Government money can be used to fund essential public services instead.

This is a Budget that not only deals with our deficit, but tackles the country’s debt in a way that supports those who work hard and do the right thing. This is a Budget that says to the ordinary person in the street that if they work hard, get up early and come home from work late they deserve a decent wage and a home. They should not have their wages topped up with benefits, but instead earn a decent wage in the first place. With the breaks that we are giving to employers, we expect them to invest in their workforce in return.

This is a Budget of aspiration not just for the individual, the family and businesses, but for the country as a whole, and that is why I support it.

First, as this is the last day of term—or at least it has the feel of the last day of term—may I thank you, Mr Deputy Speaker, and all the team in the Speaker’s Office for their warm welcome to all us new Members? That has made a huge difference to the beginning of what I hope is a long parliamentary career.

When I saw that today’s business would be a Second Reading debate on the Finance Bill with such exciting Ministers giving their remarks I thought it might be a bit dry, but in fact it has been stimulating and interesting, in particular the discussion of wages. I am glad we have got on to the question of low pay; that came up in the election and I am very pleased that the Treasury team has given it some thought. However, as somebody who worked hard on the living wage at local government level, I am a little concerned that it took a long time to introduce it in a meaningful way; the current living wage is £9.15 in London and introducing that in inner London takes an enormous amount of work for a large organisation such as a local authority or a business.

I am also a little worried about there being a cliff-edge in respect of the removal of working tax credits from those on low pay. We need a sliding scale to cover the fact that we have such a flexible workforce, which many say is a good thing. The trouble with that is that people can be in and out of work, on varying rates of pay in different sorts of employment, and have numerous different employment situations. Working tax credits tend, therefore, to be a safety net for people on low incomes, so, although this debate about low pay is to be welcomed, I am concerned that we will end up with less security for low-paid people. It may even create a perverse incentive: people may not want to take risks in the workplace and may even turn back to benefits. They may be worried that over the long term they will not be able to sustain themselves on what the Government call a living wage but which, in fact, is just an increase in the minimum wage.

I hope the hon. Lady agrees that the Chancellor, in his description of the new wage that he has earmarked, has tried to downgrade what we all know as the living wage. That is reprehensible.

I thank the hon. Gentleman for his intervention and wish him a happy birthday. I am sure it is wonderful to be 21 again.

I understand that there are many examples of the living wage up in Caledonia, and many London authorities and others are trying their darnedest to introduce the living wage, which is a good and positive step.

Clause 45, on the climate change levy, removes the levy exemption for renewable source electricity generated on or after 1 August 2015. Unhappily, that is an example of the Tories undermining investor confidence in renewable energy. They have already tried to halt the development of the cheapest form of clean energy, by pulling the plug on onshore wind, and that comes hot on the heels of the rather flat green deal. I am not sure whether any Members know about the green deal. It was introduced back in 2010, it was heralded and much money was spent on it. The promotion money probably helped a few public relations companies to keep going, but the number of households that took up the deal was very low.

My hon. Friend makes an important point. May I remind her of the promise made—it sounds bizarre now, though I remember it being made at the time—to be the greenest Government ever?

I thank my hon. Friend for her intervention. Does she also remember the huskies trip? I am not sure whether we will be visiting polar bears any more with the huskies, but I remember around 2009 the promise to which she refers and, for a short while, a real sense that we were generating some momentum and genuinely approaching green issues with energy and commitment.

I wonder whether, as we move towards the Paris summit, we will see any improvement and any genuine debate, because this Budget fails to give any hope on the green agenda. I am pleased that Opposition colleagues have chosen the climate change levy as one of three topics to be debated in Committee in September. That is when we will all have more of a chance to debate this important deal—or lack of—and when we will table amendments.

Some of the statements on taxation are quite welcome, particularly those provisions that assist people on low and medium incomes. However, there are other provisions with which we could do more. In particular, we could consider gaining a little bit more from the financial sector. As we know, there have been some announcements on anti-avoidance measures. Provided that HMRC is resourced adequately to deal with those, we might see some positive developments in that regard.

However, we could be doing much more in relation to private equity and hedge fund managers. We could strengthen some of the proposed measures around the “Mayfair” tax loophole. For example, we could look at how private equity fund managers manage to shrink their tax bills, arranging to pay 28% capital gains tax rather than 45% income tax, which is what we could be getting.

Members will be aware from their advice surgeries that we are still in the tail of the recession. There should not be one rule for certain people in society and another rule for others. That is why we need to consider charging that 45% income tax rate—rather than the 28% capital gains tax—on the portion of income paid out of the profits of the funds that those managers manage, which is called carried interest. Carried interest is their remuneration for managing other people’s money and should therefore really be taxed as income tax. Their ability to pay capital gains tax on what is properly income also allows fund managers to avoid paying any national insurance contributions on a major portion of their income.

The “Mayfair” tax loophole also permits some fund managers to reduce their tax bills even further, sometimes qualifying for additional capital gains reliefs such as entrepreneurs’ relief. I do not hear that being offered to the small cafés or the small businesses on our high street, but the entrepreneurs’ relief for people in the City allows them to pay just 10% tax on up to £10 million of their carried income. That is why I throw back the idea that this is a Budget for working people—perhaps it is a Budget for those who work in the square mile. Some people in the City are still getting a 40% tax cut. They are paying less tax on much of their income than many nurses and teachers. We know what is happening to public sector recruitment: we are losing nurses and teachers every day, because they tend to earn much lower wages than others, and of those wages they are paying a higher proportion in tax than our friends in the City.

Is it not the case that raising the tax threshold to £12,500 may help not only those in the City who are paid very low rates, but the very people that the hon. Lady is talking about outside the square mile?

I am very concerned about those people who are on that level. Indeed, many people in the financial sector, a large percentage of whom live in my constituency, work very long hours and are on low pay. I welcome some of the new tax changes, which is why I will abstain rather than vote against Second Reading tonight. However, we also know that certain others who go in on the tube with those lower paid workers, or ride their bikes in with them, might, in a good year, be earning between £1.2 million to £15 million or more. Using the private equity industry’s own statistics, we estimate that the “Mayfair” loophole may be sacrificing UK tax revenues of between £280 million to £700 million every year. That is likely to be a conservative estimate as it does not take into account forgone national insurance contributions, or the effects of some fund managers qualifying for additional entrepreneurs’ relief. Given that the Chancellor’s smaller plans are predicted to raise more than £350 million a year, we can be confident that a further tightening of the rules will raise substantially more. A simple legislative change, similar to those already achieved in our neighbouring European countries— I make no apologies for mentioning the word “Europe” in this Chamber—could ensure that some of the highest earners of the financial sector start to pay a fairer share in tax. That could be introduced as early as in this Bill, with a small change to the proposed legislation.

In conclusion, let me make some general points about productivity. The first relates to childcare, and this Budget and Bill and the various elements of productivity that need to accompany them. I understand from press reports this morning that various Departments face a difficult time on their savings targets, and I am worried that some of the good things that have come out of this Budget, small though they be in number, will be undermined by things such as the lack of childcare provision. In particular, I am thinking about cuts to local authorities, which are trying to introduce the Government’s 30-hour pledge on childcare. Children’s centres and Sure Start centres will once more be facing terrible cuts. We know that it is crucial to get women, and parents in general, back into the workforce, and that that is key to proper growth in the economy. Many economists have estimated that if we can return women to the workforce within two years after the birth of their first child—and indeed after the birth of subsequent children—the economy can take off exponentially. In many local authority areas, however, children’s centres and nurseries are closing, whereas they should be remaining open to provide that crucial childcare.

I fully support what the hon. Lady is saying, and she had no less an authority than Tim Harford in the Financial Times writing, about seven or eight weeks ago, on exactly the same point. He highlighted how Sweden has done exactly what she is describing: enabled women to go back into the workplace, to develop their skills and to go further—and of course this yielded higher taxes—unlike in the UK, where they decide to stay at home and the taxman and mothers lose out.

I agree. There are many positive examples of universal free childcare in other European countries and I wonder whether that is the sort of measure we should be looking at, rather than just cutting back for cutting back’s sake.

Childcare is crucial, but so, too, is transport. Unfortunately, in the past fortnight the Government have announced that important rail projects are no longer going to go ahead, including electrification in the midlands, and they have dithered over the airport decision, perhaps because there is division in the top ranks of the Conservative party. Those sorts of decision need to be taken quickly, at the beginning of the Parliament, so that we give the right signals about getting on with investing in our infrastructure and in social mobility.

We know that young people will be negatively affected by this Budget, not just by the cuts to housing benefit and the reduction in working tax credits for younger families, but by the transition from university grants to loans. This does not specifically relate to the debate on this Bill, but we know that the background to the Bill is the situation young people face when coming out of university. I know of a student at London Metropolitan University who will come out with a £54,000 debt after three years of studying social care and will be virtually unable to pay that back over her working life. The good announcements on the employment and training levy are undermined by the university grants situation and the 24% projected cuts to further education, which we know provides the glue to bring together the crucial employment provisions.

I could not sit down in this Chamber without quickly mentioning housing, which, as we know, is crucial, and not only to a vibrant economy and not only in the social housing sector, which I have specialised in over the years. Affordable housing is also crucial to the workforce and to those who wish to rent in the private sector, given that in London and the south-east that sector is ridiculously expensive. A family with three children who wish to rent in Finsbury Park—not Chelsea, but Finsbury Park—would require a household income of £75,000 to do so. Indeed, the average age at which Londoners get on to the housing ladder is now closer to 40 than to 30. It is crucial that we address this situation in this Parliament so that we can address social mobility and productivity. Unless a young person has access to unlimited family funds for education and housing, they face, under this Government and with this Budget and this Finance Bill, a genuinely bleak future.

There are two questions we ought to consider when thinking about passing this Finance Bill: first, if now is not the right time to balance the books, when is; and, secondly, is it right that our laws should ensure that it pays to work and that work pays?

Let me turn to the first question. Our GDP grew by 2.6% in 2014 and our economy is now the fastest growing in the western world. We have seen an increase in jobs growth, with 2 million more jobs created over the past two years. In the three months to April 2015, employment continued to rise and unemployment continued to fall.

As a matter of principle, it is right that our Government are fiscally responsible. In the previous Parliament the Labour party backed the charter for budget responsibility, recognising that it is necessary to cut the deficit. There is never a good time to implement tough decisions, but if now is not the right time, no time ever will be.

I thank the hon. and learned Lady; I feel that I am taking advantage of this birthday— I might start claiming that every day is my birthday. Would she like to comment on the behaviour in Iceland, where there have been no cuts in public spending but where debt has fallen by 8% and the deficit has fallen to zero? It has done that not though austerity, but by growing its economy. The key metric is debt to GDP, not cuts.

What is absolutely essential is that we have a strong economy, because through a strong economy we can build up business. Looking at one isolated country is not a great example—consider what is happening in Greece, which has not balanced its books and has a crippling economy. Balancing the books is absolutely right.

I have already taken one intervention from the hon. Gentleman, so I will carry on.

The question arises: what are the Opposition really waiting for before balancing our nation’s books? This Budget helps make work pay for the poorest in society and encourages those who do not have a job to get one. It seeks to ensure that we build a society in which work is rewarded.

The hon. and learned Lady asks what the Opposition are waiting for before balancing the books. I am waiting for the Chancellor to meet his promise. In that regard, what representations has she made to him about the detail in the Red Book pushing out his deficit target by yet another year?

I am answering the question. It is interesting that the Opposition were pushing for less austerity but now, when the Chancellor increases the time frame in which he wants to make the changes, the hon. Lady opposes it.

The Bill reduces taxes on working people by further increasing the personal allowance to £11,000 in 2016. The living wage will improve the lives of many people across the country. With tax credits, people are often penalised by deciding to change their hours because they lose far too much of their earnings. The Budget changes that.

It is worth noting that Labour has proposed no amendments of any nature to the Bill, which suggests that, at the very least, not everyone in the Labour party is opposed to all of it.

The hon. and learned Lady is just not right on the detail. This is not the time for amendments today; this is Second Reading. We will table many amendments; she just needs to wait.

I am grateful for that intervention. But clearly it is the time, because the SNP has tabled an amendment, and so have the Greens.

Order. We can have only one person on their feet. Mr Salmond, you know that better than anybody. If Lucy Frazer wishes to give way, she will, but we cannot have both standing on their feet. Are you giving way or not?

If it was the birthday boy, I would be giving way.

It is remarkable that the position of both the SNP and the Greens is that this Finance Bill does not address the economic needs of the country and it continues to deepen the social divide between those who have and those who have not. Both amendments are very similar. But on both those questions, nothing could be further from the truth.

Let me finish the sentence; then I will give way. On the economy, it is an economic necessity that as a country, we live within our means.

I have no problem at all with getting to a position where any state lives within its means; it is how we get there that matters. But the hon. and learned Lady surely has misspoken. If a Government are choosing to increase inheritance tax thresholds while taking billions from the poorest with changes to tax credits, then they are indeed taking from the poor to give to the very wealthy.

The hon. Gentleman is absolutely right that the question is how we get there. But when we are in a time of economic improvement, that is the very time in which we need to make changes. The changes to inheritance tax go back to a key principle and a key policy that we hold as Conservatives, which is that when you work hard and you spend money to buy a home to look after your family, and when you are taxed on the income with which you buy your home and pay tax, in the form of stamp duty, when you pay for your home, it is right not to have a third taxation when you leave your home. We all instinctively want to leave what we have earned to our children.

No; I have not finished. There is one further point. We are not taking from the very poorest; we are giving to the very poorest. [Hon. Members: “You are not.”] In some ways we are giving to the poorest. The introduction of the national living wage will mean that about 2.5 million people will immediately get a pay rise.

I shall continue. On society, it is very important that people are encouraged to work and that work pays. I agree with the director of the Living Wage Foundation that

“work should be the surest way out of poverty”.

That is what the Bill seeks to achieve.

Thank you, Mr Deputy Speaker, for the opportunity to contribute to this debate. I have two fundamental objections to the Bill. First, it continues the Government’s cruel and counterproductive austerity agenda, which is both socially destructive and economically illiterate. Secondly, it flies in the face of the Government’s own rhetoric about the threat of climate change to our economy, society, security and wellbeing. Not only does it ignore the public interest in mitigating climate risk, but it fails to realise the economic benefits to the UK of being at the forefront of the global transition to a zero-carbon, resource-efficient, sustainable economy.

Over the past few months, hundreds of leading UK businesses—not just environmentalists—have repeatedly called on the Chancellor to prioritise green investment and climate action, warning that the UK’s green economy is at a crossroads without clear policy direction. It is astonishing that, this year of all years, when the Government say that we need a bold agreement at the climate summit in Paris, the Treasury is undermining both the UK’s reputation and, more importantly, the chances of meeting our own emission targets. It is hard to see how the Government really do think that “Do as I say, not as I do” demonstrates any real leadership.

One such backward provision in this Bill is the change to vehicle excise duty. The Government claim that

“the new VED system will be reviewed as necessary to ensure that it continues to incentivise the cleanest cars.”

Yet once again there is a gaping chasm between the spin and the substance, because while zero-emission vehicles still pay nothing—so no change there—high-polluting cars will pay far less tax than at present. Again, it is not only those concerned with air pollution and climate change who are pointing out the idiocy of this measure. Once more the Chancellor has managed to unite industry and environmentalists, with the Society of Motor Manufacturers and Traders saying that

“the new regime will disincentivise take up of low emission vehicles. New technologies such as plug-in hybrid, the fastest growing ultra low emission vehicle segment, will not benefit from long-term VED incentive, threatening the ability of the UK and the UK automotive sector to meet ever stricter CO2 targets.”

The hon. Lady cannot have it both ways: she is either anti-austerity or she is not. The measures on VED that the Chancellor introduced in this Budget were to help low-income families who cannot afford a new car. Under the previous system, people who could afford to change their car were paying less VED than those who could not afford to do that. What does she say to the hard-working families in her constituency who will benefit from this measure?

I say to the hard-working families in my constituency that I do not see why they have to choose between austerity and a greener world. We can have both if we have a bit of leadership, which this Government have been so conspicuously failing to provide. Why should only richer people be able to afford greener cars? No, we want to make greener cars the norm, because it is the poorest people who suffer from the air pollution that is caused by the cars that this Government are happy to have all over our roads. The hon. Lady’s question was wrong and misguided. I am very proud to say that I am standing up for some of the poorest people in my constituency, who should be able to have decent air quality as well as not suffering from the horrendous austerity that her Government are rolling out in front of them right now. In case the Chancellor has not noticed, air pollution in the UK is a serious public health crisis that is leading to 29,000 premature deaths every year. I would love to hear what the hon. Lady says to her constituents when they are facing that degree of air pollution and health imbalance as a result of her Government’s policies.

I would love to hear it, but not that much, so I am going to continue.

Then we have the senseless proposal to tax renewable energy as if it were a fossil fuel by removing the climate change levy exemption for renewables.

On the VED changes being intended to tackle the debt or the deficit, I am sure the hon. Lady will have heard the Chancellor say that the entire set of measures was fiscally neutral and has nothing to do with bringing down the deficit or the debt.

I thank the hon. Gentleman—my hon. Friend—for that well-made point.

As campaigners have pointed out, the policy on the climate change levy exemption for renewables is like making people pay an alcohol tax on apple juice. The Government claim that it is intended to prevent taxpayers’ money from benefiting renewable electricity generated overseas. In fact, it is a completely disproportionate measure that turns a policy that was designed to encourage low-carbon electricity into just an electricity tax for businesses. It is interesting that Ministers remain suspiciously silent on the shocking revelation earlier this year that the Government spend 300 times more on backing fossil fuel projects abroad than on clean energy via the export credit agency. If they are that worried about the issue, one would have expected a little more consistency from them. The scandalous public spending on fossil fuel subsidies should be cut, not support for clean, green, home-grown renewable energy.

I agree with the shadow Energy and Climate Change Secretary, the right hon. Member for Don Valley (Caroline Flint), that removing the renewables exemption from the climate change levy will undermine investor confidence in renewable energy, and that we should instead be seizing the massive opportunities for jobs and investment that moving to a low-carbon economy would provide for this country. I hope that we can work together across all parties to remove this stupendously senseless provision from the Bill altogether.

The Minister spent a long time talking about how important this Bill is for productivity. I am a great supporter of productivity, but I fail to see how, for example, plans to scrap the long-established zero-carbon homes policy will support it. Indeed, in an open letter to the Chancellor, over 200 businesses warned:

“This sudden u-turn has undermined industry confidence in government and will now curtail investment in British innovation and manufacturing”.

So much for putting our economy on a stable footing; so much for this Government’s phoney concern about energy costs. Scrapping this policy means that future homes, offices, schools and factories will be more costly to run, locking residents and building users into higher energy bills. Businesses are increasingly speaking out not against the so-called green crap, but against the tsunami of Government blue crap that is putting up energy bills, harming business and undermining climate action.

I have a few last words on the welfare aspects of the Bill. The Chancellor can crow about raising the tax threshold so that fewer people on low incomes pay tax, but although that is the right thing to do, it does nothing to change the overall impact of his Budget and of the Finance Bill. As the IFS has shown, it leaves us with a tax and benefits system that is more regressive. The biggest losers are those in the second and third poorest tenths of the population—the working poor. Under the cover of austerity, the welfare cap will make housing, in particular, unaffordable for many families. Young and disabled people have been unfairly singled out to lose benefits. Child poverty already costs Britain upwards of £29 billion, and is set to rise under plans to limit tax credits, which could leave 3 million families on average £1,000 worse off, even allowing for increases elsewhere.

According to Treasury’s own analysis, the plan to raise the inheritance tax threshold will benefit high-income and wealthy households. Given that it is one of the easiest taxes to both avoid and evade, and that the very rich often find ways to pay very little, it is clear that this whole area needs a complete rethink.

On tax dodging, I welcome the Government’s recognition that the so-called Mayfair loophole needs to be closed. Many of Brighton’s residents have written to me about this, and it is thanks to the determination and persistence of individuals and campaigners that we have got this far. Yet again, however, the Government spin machine is in overdrive and the reality does not match the rhetoric. I urge the Chancellor to address that by agreeing that carried interest counts as income and should be taxed as income.

Finally, if the Chancellor is serious about tackling tax dodging, as I hope he is, I urge him to reconsider his opposition to the Robin Hood tax and to adopt the comprehensive policies set out in the tax dodging Bill proposals, which are supported by 25 UK and international non-governmental organisations and would generate about £3.6 billion in the UK.

I applaud the content of the Finance Bill, and I am keen to explore certain clauses within it. Before I do so, may I applaud Labour Members for agreeing with the annual investment allowance and rise in the tax allowance? There may not have been as many Labour speakers as one would expect, but those who spoke have been considered in their tone towards the Bill. However, as someone from a socialist background, it makes me sad to see no Labour Back Benchers in the Chamber. I was always told proudly by my parents that Labour was the party of Keir Hardie and Nye Bevan, and those empty Benches would be a huge disappointment to them. None the less, we can perhaps all agree that the argument is being won on the Government side of the House.

No, I will not give way. I will make some progress, if I may, and refer to my predecessor, Mr Greg Barker, who organised the husky trip that was lamented by the hon. Member for Hornsey and Wood Green (Catherine West).

Clauses 1 and 2, on the income tax and VAT locks, and clauses 3 and 4, on the personal allowance and national minimum wage provisions, demonstrate that making work pay means giving workers more of their pay. Raising the personal allowance to £12,500 shows that the Government are committed to that aim. The increase in the tax allowance will take more than 800 of my constituents in Bexhill and Battle out of the tax system altogether, and a further 50,000 of my 80,000 electors will also benefit from the tax allowance increase. Indeed, my constituents will further benefit from the tax locks over this term, which will allow them to plan, save and spend in an organised manner, without fear of the Government raids so beloved by Chancellors between 1997 and 2010.

Once the hon. Gentleman’s constituents get past the Blairite spin he is giving us, I am sure they will find that their incomes have actually decreased. Does he think that his constituents will be grateful to him when the changes go through and they find that their incomes have decreased, thanks to this Tory Government?

My constituents will be delighted that after the terror that this Government took over from, we are seeing earnings and incomes get back to their pre-recession levels. They are already there for those at pension age, of whom there are many in my constituency, and are getting there for those in other age groups. My goodness, if this Government had not taken the difficult decisions that the hon. Gentleman’s party has opposed all the way through, we would not be in the positive situation we are now in.

No, I will make some progress, if I may.

I was bemused by the Opposition’s attempts to lay claim to the policy of tax locks. Perhaps by losing the election and allowing this Government to gain a majority and introduce these clauses, they have brought the policy about.

This is a one nation Government that seek to help people into work and, in so doing, give them hope, aspiration and pride. By taking those who work 30 hours a week on the minimum wage out of the tax system, the Government are committing to the principle that work pays. Furthermore, by committing to review that principle and assess the tax position of an individual working 30 hours on the national minimum wage when reviewing the tax allowance over and above £12,500 in the future, the Government are demonstrating that they really mean for that proposal to be here to stay.

I am listening carefully to the hon. Gentleman. I am especially pleased to hear that he pays great attention to the views of his constituents. When a single parent with two kids who loses thousands in tax credits comes to his surgery and explains how much worse off they are in work, what is he going to say?

I will say that this Government, by creating millions of jobs, will give that individual the opportunity to get into work. If I were on the Labour or SNP Benches, I would say, “We will keep you on subsidies, keep you in your place and not give you hope, aspiration and a better opportunity for your life.”

No, I will not give way. I will make progress.

The first four clauses demonstrate that the Government are on the side of the worker, not the abstainer.

Clauses 7 and 8 relate to corporation tax and the annual investment allowance. I welcome the measures to reduce corporation tax to 19% by 2017 and 18% by 2020. In my constituency of Bexhill and Battle, the Government and East Sussex County Council have ploughed millions of pounds into a new link road between Bexhill and Hastings, which will deliver new homes, 500,000 square feet of new business park and a country park. The new link road and the labour that will come from the new housing will, if delivered in conjunction with the high-speed rail project from Bexhill to London St Pancras that we hope to get, encourage new businesses to relocate and existing businesses to expand.

However, we need to do more than deliver infrastructure. We need to encourage entrepreneurs to take risks, create new jobs and deliver wealth. That wealth will then be delivered to the Exchequer and the country as a whole. I therefore welcome the cut to corporation tax, which tells the world’s companies that UK plc is open for worldwide business, with the lowest corporation tax in the G7. I hope to use the favourable economic climate to champion the idea that companies should locate themselves in my constituency and to end its status as a constituency with no major corporate headquarters within its boundary.

I welcome the permanent status of the annual investment allowance. The temporary two-year allowance did much to boost spending on plant and machinery in rural constituencies such as mine. The trickle-down effect on suppliers, producers and small businesses has been immense. I welcome the manner in which my Government use the tax system to give firms more money to invest, rather than using the model of Government borrowing and spending, which crowds out private companies from the market.

The final clause that I wish to consider is clause 9 on the increased nil-rate band for homes that are inherited by descendants. Representing Bexhill and Battle as I do, I feel that the policy of effectively increasing the inheritance tax threshold to £1 million per couple will be highly relevant and even more highly welcome. Individuals who have worked hard and done the right thing deserve the right to hand on the fruits of their labour to their descendents, and that is particularly welcome in a period when interest rates on savings and investments has been low and delivered low yield, albeit that that has helped those with mortgages.

I welcome the mantra behind the Bill: lower taxes to make work pay; fairness by clamping down on those who do not pay their fair share of taxes; and rewarding endeavour by encouraging companies to invest and expand in this country by sending out positive signals that business is open under this Conservative Government. I look forward to proclaiming proudly the Government’s economic policies over the summer, and I am pleased that Labour Members have already stolen a march and are perhaps doing so already.

Thank you for your forbearance, Mr Deputy Speaker. I had to slip out of the Chamber to take part in the Treasury Committee’s questioning of the Chancellor, and I bring a few bon mots from him to add to the debate.

The test of the Finance Bill and Budget is whether it will raise productivity—one might ask why the Chancellor has waited for five years to get round to that necessary development, but that is the test. Does the Bill meet the test? No it does not. Between the March Budget and the summer Budget, the Chancellor has reduced projected capital spending, and we raised that point in questions to him this morning, but in his boyish way he avoided answering it. Nevertheless, we have seen a reduction in the projected capital spend.

Capital spending is vital. It is the basic thing we need to get the plant, machinery and infrastructure that raise productivity, and Britain’s fundamental weakness in productivity is that we do not spend enough on capital and plant per worker. The Chancellor is cutting his projected capital spending, and he has done that in the five months since the March Budget and now—I wonder why.

The Chancellor had an interesting explanation for why he is doing that—in the Treasury Committee he could not avoid saying that that is what he was doing—because he said that he had discovered a way of making the outcome of his spending more efficient so that he needs less of it. If he goes on in that way, in another five months and by the time we get to the autumn statement, he will have reduced capital spending projections even more. I am talking about capital spending projections to 2020, so there is no real indication in the Budget that productivity will rise.

There are other things wrong with the Budget. Consider the investment allowance that the hon. Member for Bexhill and Battle (Huw Merriman) alluded to. De facto, the annual investment allowance is being cut from £0.5 million to £200,000. I know that, formally speaking, the available capital allowance was a marginal £20,000, and an emergency £0.5 million level was introduced in a previous Budget. Like some classic huckster trying to sell, the Chancellor pretended that the capital allowance was going to be removed on 1 January 2016, so that he could suddenly appear and say that actually it will be £200,000. We all knew that he was going to do that because in the autumn statement and the March Budget, while talking about his desire to raise productivity, he somehow neglected to tell us that the annual investment allowance was going to be not £20,000 but £200,000 in January.

My hon. Friend might recall that before the general election, if memory serves me right, only one party was praised in the Financial Times for its plans to raise productivity, and that was the SNP. Could that be why we polled 51% of votes in the seats where we stood, but the Conservatives polled only 37% across the seats where they stood?

I know that is true from talking to the small businesses in my constituency.

The Chancellor claims to want a productivity revolution, but that is given the lie by the fact that in the autumn statement in December and the March Budget he did not announce that the £500,000 allowance would stay or that it would in fact be £200,000. Investment requires long-term confidence—telling businesses well in advance what they can do in terms of investment. The fact that the Chancellor did not tell us, but has produced a rabbit out of a hat in the summer Budget, tells me that he is not that serious.

We have also heard today that the Chancellor intends to cut corporation tax progressively over the spending period to 18%. I do not gainsay that, but I ask the House to look at what happens when cutting corporation tax significantly is combined with a de facto reduction in the annual investment allowance. Surely we want to cut corporation tax to encourage firms to use their surplus capital to invest in plant and machinery. It is therefore necessary to maintain the £500,000 level—or perhaps even raise it further—to encourage firms to put their money into plant and machinery to raise productivity. By de facto cutting the investment allowance from £500,000 to £200,000 at the same time as cutting corporation tax, the Chancellor will encourage firms to keep their surplus capital sitting in the bank, instead of investing in plant and machinery. That is what has been happening in this country, and that is one of the reasons why productivity has fallen since 2008.

Is it not therefore all the more important —at a time when the banks are still not lending fully—to incentivise to the highest possible extent to encourage businesses to use their own resources for investment?

I take my hon. Friend’s point. We need incentives that co-ordinate and integrate, not just a series of random measures that allow the Chancellor to make headlines here and there but do not have an impact on productivity in the longer term.

The surplus balances held by British companies total something in excess of £0.5 trillion, and some estimates put it at more than £1 trillion. A reasonable estimate is £0.5 trillion or £550 billion. How do we incentivise firms to take that money out of the bank and put it into plant and machinery and create jobs? The Chancellor is doing his best to provide incentives in another direction. Raising the inheritance allowance on property is another way of encouraging shareholders—when shares are bought back by companies—to put their money into existing bricks and mortar rather than invest in companies.

We have a Budget that claims to be about productivity, but provides none of the efficient incentives required to get plant and machinery that will create jobs. Let us look at what has happened to productivity since 2008. Initially, when the recession started, UK productivity fell. What normally happens in the first few years of a recession, as workers are shed and firms rely on using their existing plant and machinery more intensively, productivity rises. It rose in most of the advanced industrial countries in Europe in the two or three years after the recession, and in America. Thereafter, we would expect firms to start to invest in new innovation and developments, and productivity would rise not simply from the shedding of labour but from expansion, new product lines and new companies. That is what has happened in America, which had a significant increase in investment and innovation, and productivity has risen significantly in a long-range curve, as American companies have grabbed market share. In the UK, we saw a second downward bump in productivity in 2011. That came just as the Chancellor realised the mistake he had made in rushing for austerity between 2010-11. He had made massive cuts, but at that point he changed. We have had several long-term plans. In 2011, his new long-term plan was to turn on the monetary tap and crank up an artificial housing boom. Of course, that created even more incentives for individuals, financial companies and businesses to put money into trading in property, rather than in factories and manufacturing.

What we saw post-2011 was British productivity getting even worse, while the productivity of other industrial countries—in particular the United States, but also China—started to improve for the very best of reasons: they were investing in new plant machinery. We have not solved our productivity problem because we have not got the incentives right. I see nothing in the Budget to change that.

Mr Deputy Speaker, you and others have made the comment that today is a day on which a birthday has occurred, so before I have to, in response to interventions, may I say to the hon. Member for Na h-Eileanan an Iar (Mr MacNeil) breithlá sona dó? Go maire sé on lá.

I should also make an apology, because I missed a birthday yesterday in the debate on the Welfare Reform and Work Bill, which relates to the Budget measures.

The hon. Gentleman gives me the opportunity to make a bilingual intervention—in Irish and in Scottish. Go raibh míle maith agat agus mòran taing.

We are getting far off the Finance Bill.

The Government told us that the Finance Bill should be taken as part of a whole suite of measures from the Budget, including those in the Welfare Reform and Work Bill. Yesterday, we missed the six-year birthday of the Second Reading debate on the Child Poverty Bill in 2009, when the then shadow Secretary of State for Work and Pensions, now the Home Secretary, said:

“When we talk about child poverty, we are also talking about family poverty. Children are poor because their parents are poor…I would almost like to change the name of the Bill from the Child Poverty Bill to the child and family poverty Bill.”—[Official Report, 20 July 2009; Vol. 496, c. 613.]

The measures in the Welfare Reform and Work Bill and the Budget tell us to forget that child poverty has anything to do with parental and household income, and that the Government are going to abolish definitions of child poverty. We heard from the Chancellor of the Exchequer today at Treasury questions that he believes the Budget is offering a contract: higher wages for less dependence on welfare. He said that people would support that contract. I think more people will see the con trick in what the Chancellor is doing than the contract.

It will not have escaped the hon. Gentleman’s notice that the Government seem to have run out of speakers on the Second Reading of the Finance Bill. Might that be because of the reality that thousands of families with children in every single constituency in this country are going to be worse off as a result of the Budget? Is that why the Tory party seems so unenthusiastic about supporting the Budget?

The right hon. Gentleman makes a very good point. I think many people will wonder about the paucity of attendance on the Benches at such an important debate today. We have been served notice that there will be various amendments in later stages of the Bill, but I think people would have expected a bigger attendance here today. Given the impact it will have on many people with marginal incomes and the consternation that many people feel about MPs’ pay increases and other matters, they will be wondering where everybody is.

There are questions about where Labour and Tory Members are at the moment. Will the hon. Gentleman hazard a guess that they are perhaps off at merger talks?

Maybe they are away celebrating other people’s birthdays. [Laughter.] Maybe the hon. Gentleman, having had so many interventions, can now safely go and celebrate his. We all know he was here and not somewhere else.

In the provisions on the national living wage and some of the other early clauses, the Chancellor seems to be doing exactly what he decried his predecessors for doing: passing legislation to put restraints or constraints on himself. He is advertising in legislation his own behavioural discipline. It is the ultimate political selfie to put oneself into legislation. Some only last for the life of the Parliament, yet are being put into legislation. How gratuitous a political exercise is that? Perhaps that is why other hon. Members cannot see fit to indulge the Bill too much.

Government Members have said that the charter for budget responsibility is a key issue, which it is, but a key aspect of the charter is the welfare cap. In yesterday’s debate, we heard references to the benefits cap—there has been much discussion about the benefits cap, which affects households—but less attention has been paid to the overall implications of the welfare cap, which was first introduced as part of the charter last year. If we look at what the summer Budget, as opposed to the March Budget, does for the welfare cap over the next four years, we find some revealing figures. In the March Budget, the overall welfare cap for the UK for 2016-17 was £122.3 billion; in this Budget, it is £115.2 billion. For 2017-18, it was £124.8 billion in the March Budget; it is £114.6 billion in this Budget. It was £127 billion for 2018-19 in the March Budget, ahead of the election; it is £114 billion in the summer Budget, after the election. For 2019-20, it was £129.8 billion in the March Budget; in this summer Budget, it is £113.5 billion. Over those four spending years, that is a cumulative cut of £46.5 billion, as a result of the charter for budget responsibility and the welfare cap.

Many Opposition Members—or perhaps not many of us, as I think only 20-odd of us voted against the welfare cap when it was introduced—said that what the Treasury was bubble-wrapping as a neutral budgetary tool would turn into a vicious cuts weapon, and now we see it, in the name of the welfare cap. When there is so much discussion about the benefits cap, people forget that the real story is the welfare cap, and that will bear down on people in my constituency and lead to more conflict around the next wave of welfare reform when it comes to the Northern Ireland Assembly.

We heard earlier from the hon. Member for East Antrim (Sammy Wilson) and we heard yesterday what he thinks the implications of the cap will be. If he was still here, I would be saying to him directly that on this issue he and his party need to catch on; they have been wrong in the past, and it is a bit late to be scrambling now, when they have invited this very situation. Many of us told them that their support for the welfare cap, on top of their support for the last wave of welfare reform in the Assembly, would lead to this very situation, but they told us to forget about those concerns because there was nothing we could do about it.

Will the hon. Gentleman accept that Members from eight political parties last night voted against the welfare Bill, so perhaps it is a case of “better one sinner that repenteth”?

Yes, I certainly have no problem with that, and I welcome the breadth of opposition. I also welcome the depth of opposition I heard from some hon. Members who, because of their party’s Whips situation, did not vote but whom I know care passionately about a number of issues and have served notice that they will vote in the amendment stages. I hope, therefore, that we can go further in this Bill and yesterday’s Bill to build on that.

However, let us be clear: this Bill purports to cover more than just the issues that we discussed yesterday. Hon. Members have referred to the questions around corporation tax, and of course the Government have served notice that they are going to reduce it. I am someone who has supported the measures to give Northern Ireland the devolved capacity to vary the rate of corporation tax, and I have no issue or argument against that. Indeed, I predicted that one of the reasons why the Conservatives were so keen to devolve corporation tax was that they wanted to create an excuse or cover to do so in England and Wales as well.

However, although that can be welcome in Northern Ireland at one level, because it means that the cost of any variation in corporation tax for us will be less in time, let us be clear that, contrary to what the hon. Member for East Antrim said yesterday, it will not be parties such as mine holding these issues up; it will be the tactics and policies of the Government, who are trying to create a budgetary arm-lock on the devolved Executive. They are basically saying, “Unless you get your Assembly to pass the legislation that we want in respect of welfare reform, we are going to create budget stress”—which in turn will lead to a budget crisis, which in turn will become a political crisis—“as the price of your failure to do so.”

When we are locked in that budget crisis—which will be contrived and the result of the Government bullying us on welfare reform—they will then say, “You don’t have a balanced and sustainable budget; therefore, you’re not getting your corporation tax powers.” Just as the Government said they would not introduce the corporation tax Bill until they were satisfied with what it looked like the Assembly was going to do on welfare reform, so they have built in a clause for Northern Ireland in the Bill that says that, come 2017, they will not switch on the power unless they are satisfied that there is a balanced and sustainable budget.

When it comes to the outstanding measures in the Scotland Bill, I hope that hon. Members present in the Chamber will be mindful of the possible need for a clause to prevent the Treasury from adopting any such tactic on the dual exercise of welfare powers between Westminster and the Scottish Parliament, because the “twilight zone” difficulty that Northern Ireland has got into offers a very salient warning.

I have the utmost respect for the hon. Gentleman, and he knows that, but the real reason why we have an impasse in Northern Ireland is the unfortunate delay from the SDLP in supporting the Stormont House agreement, which everyone signed up to. With that comes the delay in the corporation tax benefits for Northern Ireland. Surely it is time now for his party to honestly say, “Let’s support the Stormont House agreement, let’s get corporation tax back and let’s help everyone across the whole of the political spectrum in Northern Ireland.”

I would offer the hon. Gentleman the mutual observation of respect, but would also say, first, that we are not holding anything up. The legislation has already been passed. It provides for the switch-on of the powers in 2017. It is the Treasury that is imposing the condition, and let us remember that it is locked on to that condition in a way that is completely wrong and unwarranted. It is basically saying, “Yes, you have the nominal legislative power over welfare reform, but unless you do it exactly to our taste, as karaoke legislation, then we are going to interfere with your budget and claw back from the Barnett formula.” That is wrong. The Treasury has other ways of trying to control these things. If this is about welfare spending, then the Treasury already has a welfare cap that allows it to police welfare spending—literally—without creating budget stress within the Executive and between parties, so there is a different course that can be followed on all this.

As for some of the other provisions, I have no doubt that the Government will go further in their cuts to corporation tax. I know that they are saying that they want to get to 18% by 2020, but the Chancellor said in the second year of the last Parliament that there would be no more corporation tax cuts in that Parliament and of course there were. He is exactly lining up to do that again.

Let me touch on some of the other issues. The hon. Member for East Antrim rightly mentioned the road fund, in that the Chancellor said in his statement that the Government would have to work out exactly what would happen with the equivalent moneys in Northern Ireland—the money that would be raised in vehicle duties. However, I hope it is not the case that only the moneys raised directly in vehicle duties in Northern Ireland would be hypothecated for those purposes. Given the nature of our economy and the fact that many of the key commercial vehicles on our roads are not registered in Northern Ireland—many of those servicing many of our companies, not least in the retail sector, come from outside the region—and also, obviously, given our higher rurality, we have high relative overheads on roads, so we would need something more than that.

I asked the Financial Secretary earlier to clarify the position on banking because he seemed to be saying that the bank levy had largely served its purpose: the Government had to introduce it, but it was very much of its time, and now we needed to move on to something different. Let us recognise that although clause 18 rightly says that, in future, banks will not receive tax relief on expenses for compensation payments made to customers in respect of certain defined issues, until now the banks have been able to claim that tax relief. There is a catalogue of huge liabilities that they face because of their own wrongdoing, but they were able to absorb all that along with the bank levy, so it is not as though the bank levy was a serious burden to them.

Of course, the Government have responded to pressure from the likes of HSBC and StanChart, who have been saying that they will move if something is not done about the bank levy. So the Government have moved on the bank levy, but they are trying to tell the rest of us that that will be more than compensated for by the surcharge on corporation tax. If they reduce corporation tax by much more than they are currently advertising, that surcharge will not amount to as much. Given how they have rolled over on the bank levy, it is not very hard to canvass the suspicion that they will equally ameliorate the intended surcharge in response to the same threat.

On renewables, I do not intend to go on at anything like the same length or in the same colour as the hon. Member for East Antrim, but I want to make it clear that there is a different view from Northern Ireland. We see the Chancellor’s measures as directly interfering in our capacity to have a greener economy and to grow firms and businesses. It is a key target of the single electricity market in Ireland, north and south, to achieve over 40% supply from renewables. It is a key element in the grid investment that is needed. It is also a key aspect of the market, both north and south, to seek to export in terms of renewables. The Chancellor’s measures therefore fundamentally interfere in one of the growth sectors in Northern Ireland. It is a growth sector not only in terms of generation but in terms of renewable technologies, and the investment and export that goes with those. We take a fundamentally different view from that of the hon. Member for East Antrim. Let me be very clear: on issues such as contracts for difference, we have different politics, different starting points and different end points.

I agree with the hon. Gentleman on the age restriction on the national living wage; the fact that it does not apply to under-25s is grossly wrong. The whole concept of the national living wage as put forward by the Chancellor is not only an attempt to slightly enhance or rebadge the minimum wage; it is a blatant attempt to puncture the living wage, and to change its agenda and what is intended by it. That comes alongside other measures that we have discussed, such as changes to tax credits, which will directly take over £1,200 a year—over £100 a month—from people who are in work.

We are told that nobody who has more than two children at the moment will lose out as a result of the changes to the limits on child benefit; that will come later. If we are really to believe what Conservative Members were telling us earlier—that the number of children that people are having is an economic choice to do with the availability of tax credits and the eligibility for benefits—we need to hear from relevant Ministers how they will cope with the baby boom that we will have before April 2017, as people ensure that children are born in time to qualify for benefits. There will be either a race for benefits or a race for births, or both, if we believe half of what we heard across the way yesterday.

The new banking measures replace the big measures that were introduced by the Prime Minister and the Chancellor during the last Parliament, otherwise known as Project Merlin. A fairly effete bank levy was intended to sort out the banks and put manners on them. Now we have a new Project Merlin: the Chancellor seems to have decided to take key social policies from Merlin Entertainments. A family means two adults and two children, and no more. There is no deal for anyone who goes beyond that.

I rise to speak in support of the SNP amendment and, hopefully, to persuade the House to deny the Bill a Second Reading.

Before I go into the details of the Bill, I want to deal with a question of overview. Over the years, we have grown used to hearing glib statements from the Government, and soundbites rather than substance. Many of us marvel at the fact that the Conservatives manage, without smile or grimace, to get the words “working people” out of their mouths quite so often, given that, we suspect, some of them rarely meet the working people of this country, let alone have their best interests at heart. We have also grown used to the phrase ”long-term economic plan”, although the plan has been going for five years and has so far failed to meet every single objective that was set for it by the Chancellor. The latest mantra we hear consists of six words: the Conservatives believe in “high wages, low taxes, low welfare”. That is the type of society that they want to see.

I think it was the hon. Member for Gloucester (Richard Graham) who, at an early stage in the debate, asked the Opposition spokesman, the hon. Member for Birmingham, Ladywood (Shabana Mahmood), whether she agreed with the general direction indicated by those six words. I do not want to misrepresent the hon. Lady, but I did not hear her response, and I think that she tried to dodge the question. Well, I do not want to dodge the question. I want to say that I consider that statement to be facetious, glib and shallow, and that it is not a statement with which my colleagues and I agree.

I want to see a society in which there are high wages, fair taxes and decent welfare provision for everyone, and that is what I think we should be aiming for. I believe that prosperity is not just about what we have as individuals, and the wealth that one family gets through a wage packet, but about the things that we have together, in our society and in our communities. I believe in the whole concept of the social wage. If we know that we have well-funded, adequate, strong public services in respect of, for instance, health and education, and if we know that we have a strong system of social insurance that gives us a safety net should we fall ill, suffer disability, or find ourselves between periods of employment, we are much richer as a result. That is our attitude, and that is the philosophy in which we believe.

Let me now deal with some of the provisions in the Bill. So far, no one has discussed the tax lock provisions in clauses 1 and 2. The Government are saying that, for the remainder of the current Parliament, they will take upon themselves a legal obligation not to increase VAT or income tax. I made some inquiries about that, because I thought it a strange thing for the Government to want to do. After all, they are the Government now, and they will be the Government next year and for the following five years. If these provisions are included in what will become the Finance Act 2015, it will only take a clause in the 2016 Finance Bill to overturn them. They are therefore literally not worth the paper on which they are written. That is another example of a Government who prefer public relations to concern about the public finances.

The second detailed issue that I want to raise is that of the personal allowance. Members on both sides of the House will probably welcome the increase in the allowance and, as we are told, the ability of people to keep a little more of what they earn; but let us not kid ourselves.