I beg to move, That the Bill be now read a Second time.
I do hope that this will be worth waiting for, Mr Speaker. As my right hon. Friend the Chancellor set out in the recent Budget, the Government’s long-term economic plan is securing the country’s economic recovery. The British economy is set to grow faster than that of any country in the G7. Our labour market is delivering the highest employment in our history. This year, the deficit is forecast to be cut by almost two thirds from its peak, and is set to fall each year after that, so that we will deliver a surplus in 2019-20. However, being one of most open economies in the world means that we are not immune to global slowdowns and shocks, which makes it all the more imperative that we continue the hard work we have carried out over the past six years to help our economy face up to those challenges.
This Finance Bill demonstrates this Government’s commitment to putting stability first.
I will very happily take interventions, but let me first set out to right hon. and hon. Members the order in which I intend to discuss the measures in the Bill. I will outline, first, how this Bill provides opportunities for households, then how it supports British business, and finally how it ensures that the businesses pay the tax that they owe.
In the context of the European side of the global question to which the Minister has referred, is he aware of the substantial deficit in the last quarter figures that the Office for National Statistics has just published in respect of our relations with Europe, which is causing a lot of difficulty for the United Kingdom economy? Last year, we had a deficit on current account transactions—imports, exports, goods and services—of £58 billion, whereas we had a surplus with the rest of the world in the same services of about £30 billion. By contrast, Germany had a surplus of £67 billion in its dealings with the other 27 member states, which shows a significant reason why we should leave the European Union: this single market just does not work for us.
My hon. Friend takes me away from the Bill, but let me say in response that I do not accept his analysis. First, on trade, both voluntary parties to any transaction benefit from trade. Secondly, we have to remember that trade deficits or surpluses are the result of a series of transactions decided by individuals and businesses on the basis of what they perceive is of value. I would argue that it is always desirable to seek to remove trade barriers to facilitate fair and free trade. The removal of trade barriers within the single market is, I think, one of the advantages of membership of the European Union, so I am not persuaded by his argument.
Let me start by looking at the measures in the Bill that provide opportunities for families who work hard and save. The Government have long been committed to the principle that those who work should be able to keep more of the money they earn. As a result of action taken in the last Parliament, almost 28 million individuals received a tax cut, with a typical tax bill reduced by £825. We go even further in this Bill by increasing the tax-free personal allowance to £11,500 in 2017-18—a £500 increase from 2016-17. The higher rate threshold will also increase by £2,000 from £43,000 in 2016-17 to £45,000 in 2017-18. As a result of those changes, we will be cutting tax for more than 31 million people by 2017-18. Compared with 2010, a typical basic rate taxpayer will be paying more than £1,000 less in tax in April 2017. That is a proud record.
We still have one of the most complex tax systems in the world. I do not know if my hon. Friend was here for the Prime Minister’s statement and our long session of questions about tax avoidance, but does he recall that I wrote to him a year or two ago—I have also led debates on the subject—about moving towards a flatter tax system? I appreciate that because the top 1% pay 27% of all tax, we cannot make that move in one bound, but does he agree that unless we stop our tax system becoming so complex and instead have flatter taxation and merge rates and allowances, we will never get rid of the vast tax avoidance industry? I do not expect an answer, but I would appreciate an indication that, as the Treasury prepares for the next autumn statement and Budget, it will be thinking in terms of simplifying our tax system.
Simplification does matter. One of the measures announced in the Budget—it is not in the Bill, for reasons that will become apparent—is the abolition of class 2 national insurance contributions. National insurance contributions are not covered in Finance Bills, but that is an example of a tax being removed—a tax that created a considerable administrative burden for both taxpayers and Her Majesty’s Revenue and Customs.
The Bill also puts the Office of Tax Simplification on a statutory footing. In the last Parliament, the OTS made approximately 400 recommendations, almost half of which have been implemented. The OTS is being strengthened; it has a new chair, Angela Knight, who is already performing a valuable role in leading the debate, and its resources have been increased. I am sure my hon. Friend will follow the OTS’s progress closely, scrutinise its performance and decide whether it is proposing measures that take us in the direction of which he approves.
Would my hon. Friend welcome the OTS looking at some more fundamental tax simplification measures such as wholesale reform of individual taxation, rather than focusing on small, individual parts of taxes, as a way of moving us to a much simpler tax system more quickly?
My hon. Friend makes an important point. There is considerable value in the OTS looking at specific areas, but I think there is a case for it looking at broader matters. Indeed, in its reviews—of small business taxation, for example—it is addressing some of those bigger questions.
I thank the Minister for being so accommodating in giving way. Looking at part 10 of the Bill and given the pressure the Prime Minister has been under this week, with the Panama papers and the statement today, I wonder why the Bill does not include a measure to allow HMRC to name and shame publicly those who are involved in tax avoidance not after the third warning but after the first warning, and so send a much clearer signal?
I will discuss avoidance and evasion shortly, but on that specific proposal, we have strengthened HMRC’s capabilities in this area. The ability to name and shame facilitators of tax avoidance was introduced by this Government, and I think it is right that we have done that. As for the precise process, we think the balance is about right—it is difficult to see that there would be a substantial difference in terms of effectiveness if action were taken earlier. The whole idea of the regime was introduced by this Government.
As well as helping working households, the Government are committed to creating a nation of savers. In the Bill, we legislate to increase the personal savings allowance from April 2016, meaning that basic rate taxpayers will pay no tax on their savings income up to £1,000 and higher rate taxpayers will pay no tax on their savings income up to £500. As a result, 95% of taxpayers will pay no income tax on savings.
While supporting savers, we must also ensure that support is well targeted. The pension lifetime allowance is currently set at £1.25 million, but 96% of individuals now approaching retirement have a pension pot worth less than £1 million. We want a system that is targeted and sustainable and supports the majority of those approaching retirement. That is why the Bill reduces the pension lifetime allowance to £1 million—a change that will affect only the wealthiest pension savers.
The Bill also implements long overdue reform of the outdated and complex dividend tax system. The current system was designed at a time when total tax due on dividends was as high as 80% for some taxpayers; it also provides incentives for individuals to set up a company and pay themselves through dividends to reduce their tax bill. For those reasons, the Government are modernising and simplifying the dividend tax system by abolishing the dividends tax credit and replacing it with a new £5,000 tax-free allowance. The Bill also sets the dividend tax rates at 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers. Some 95% of all taxpayers and more than three quarters of those receiving dividend income will either gain or be unaffected by the changes.
Supporting home ownership and first-time buyers is a key priority for the Government. Although people should be free to purchase a second home or invest in a buy-to-let property, that can affect other people’s ability to get on the property ladder. The Bill therefore implements higher rates of stamp duty land tax for the purchase of additional residential properties that are three percentage points above the standard rates.
I have been made aware that the Bill as drafted might lead to some main houses with an annexe for older relatives attracting the higher rates of SDLT intended to apply to additional properties. I thank my right hon. Friend the Member for Brentwood and Ongar (Sir Eric Pickles) for bringing that to my attention. I am happy to reassure the House that that is not our intention and the Government will table an amendment in Committee to correct the error and ensure fair treatment for annexes.
I am most grateful for that clarification from the Government. It is important in terms of social policy, as annexes are used not only by elderly relatives but by other family members, disabled children with special needs and so on. The Government are making an important statement that these annexes should prosper. I hope my hon. Friend will forgive me for saying that I will look carefully at the detail of the amendment, but I am grateful for the courteous way in which he dealt with me.
I am grateful to my right hon. Friend for the courteous way in which he dealt with me, too. He achieved a great deal in his role as Secretary of State for Communities and Local Government by addressing the issue in the context of council tax. He will find in this case—and he will want to look at the details, as we are going a bit further than council tax rules to provide support and reassurance to families—a small number of transactions are affected by the measure, but it is important that we provide clarity. We certainly do not want to discourage people who wish to create an annexe for an elderly or disabled relative, providing them with support close at hand.
The measures that I have outlined are important, and help working people to keep and save more of what they earn while ensuring that we have a modern and targeted tax system. I should like to address briefly an important issue that we discussed in the Budget debate: VAT on sanitary products. We heard people’s anger loud and clear, and we said that we would fight for agreement to reduce the VAT rate to zero, and all European leaders agreed our plan to do just that. Last week, the European Commission action plan on VAT was published, and it is an important step towards a common-sense VAT system that works for British businesses and people. The Government are committed to making that change, and let me make that point to those who have raised it, including the hon. Member for Dewsbury (Paula Sherriff), who is in the Chamber, and other hon. Members. I am proud that in the Finance Bill we are legislating to enable zero VAT rates for women’s sanitary products.
I congratulate my hon. Friend on the progress he has made. Why does clause 115 say that the measure will not come into effect when the Bill receives Royal Assent, but is subject to the Treasury introducing a provision at some later stage? Why can we not legislate on this in the Bill without any qualification?
It is customary, with changes in VAT rates, to give retailers notice. It is not usual for VAT changes to be put in place on the date of Royal Assent, as notice is usually provided. I reassure my hon. Friend that the intention is to provide a short period of time, following Royal Assent, in which retailers will have an opportunity to adjust prices. This is no desire by the Treasury to kick this into the long grass—we want to make progress on the matter.
Pricing is essentially a matter for the producers, retailers and customers. We would certainly expect the reduction to be passed on, and I have no doubt that considerable attention will be given to what happens to the pricing of sanitary products after the VAT reduction, and there will be pressure on retailers to pass on the benefits to customers. We do not have a position—we do not have the capability to direct and order people—and we do not have a prices policy as such, but we expect that the reductions will be passed on to customers.
I thank the Minister for being accommodating. I have written to leading retailers and manufacturers of female sanitary products asking to meet them to discuss this. I would be grateful if he offered his support for that course of action. If the Government are unwilling to do that, we may need to consider adding a provision to the Bill.
I very much support the hon. Lady’s cause, and she supports my cause that manufacturers and retailers should pass on the VAT abolition to customers, and we expect to see that happen.
I should like to turn to the way in which the Bill will support British business and ensure that our employees have the skills they need. The Government committed in the Budget to put stability first, because it gives businesses the certainty that they need to invest, grow and employ people. The core of our support for British business is low taxes, and the Budget provides the biggest ever cut in business rates, worth over £6.7 billion over the next five years. Measures in the Bill will do more. First, we will again cut the main rate of corporation tax and reduce it to 17% in 2020, ensuring that we have the lowest corporation tax in the G20. By the end of this Parliament, corporation tax cuts delivered since 2010 will save businesses almost £15 billion a year, providing an important boost for our international competitiveness.
Our labour market is delivering the highest employment in our history, but we need to ensure that it has the right skills. The Bill introduces an apprenticeship levy of 0.5% of an employer’s pay bill, where it exceeds £3 million, from April 2017. That will deliver 3 million apprenticeship starts by 2010. By 2019-20, Government spending on apprenticeships in cash terms will be double the level of spending in 2010-11. We will put funding in the hands of employers to ensure that it delivers the training that they need by ring-fencing apprenticeship funding in England.
In the last Parliament, we took important steps to help entrepreneurs who start and grow businesses. We also want to ensure that they can access the investment that they need as they grow, and to that end we are legislating to reduce the higher rate of capital gains tax from 28% to 20%, and the basic rate from 18% to 10% from April 2016. Gains on residential property and the receipt of carried interest will remain unchanged. Those changes will create an incentive to invest in shares over property, and will help British companies to access the finance that they need to expand and create more jobs.
Finally, the recent Budget took necessary and radical action to support the oil and gas tax regime through difficult times. The Bill will legislate for a key part of this strategy in permanently zero-rating petroleum revenue tax. From April 2016, petroleum revenue tax will be reduced from 35% to 0%. We believe that wherever possible, we should use the tax system to stimulate growth and investment, whatever the sector.
I have heard all of this on skills before from the Government. Will the Minister explain the productivity puzzle? Productivity appears to have gone down, rather than up. Why is that, because in every Budget attention has been given to skills? What has gone wrong with productivity in this country?
The hon. Gentleman makes an important point. It is a long-standing issue for the United Kingdom economy. I would argue that the steps we have taken as a Government to ensure that we have a competitive, business-friendly tax environment, that we invest in skills and increase the number of apprenticeships, and that we spend more on transport infrastructure—we are spending £60 billion over the course of this Parliament—will help to drive up productivity. Without those measures, our productivity levels would not be as high as they are. Further work still needs to be done, but policies that result in, for example, financial crisis so that we cannot afford transport infrastructure spending or that drive investment away from this country by being unfriendly to business will only damage productivity and will not help.
On investment in transport infrastructure, the Budget surely says that between 2018-19 and 2019-20 the Government will cut infrastructure investment by a whole £7 billion in one year in order to accommodate the Chancellor’s desire to run a budget surplus in 2020. How does that justify what the Financial Secretary has just said?
The Budget brings forward the expenditure on transport infrastructure in this Parliament so that we can gain the benefits of that investment earlier. The hon. Gentleman should welcome that.
Before discussing the measures in the Bill that address avoidance and evasion, I shall briefly address the issue that the Prime Minister covered earlier today—the Panama papers. Those papers have again put the spotlight on the global scourge of tax evasion and avoidance. As the Prime Minister set out earlier today, we are taking further action. First, HMRC and the National Crime Agency will lead a new joint taskforce to analyse the Panama papers and take rapid action where there is wrongdoing. It will initially have new funding of up to £10 million and will report to the Chancellor and the Home Secretary later this year.
Secondly, we will bring forward plans to introduce a criminal offence for corporations which fail to stop their staff facilitating tax evasion, ahead of next month’s summit to tackle corruption in all its forms. For the first time, companies will be held criminally liable if they fail to stop their employees facilitating tax evasion. Thirdly, our Crown dependencies and overseas territories have agreed to provide UK law enforcement and tax agencies with full access to information on the beneficial ownership of companies. We have finalised arrangements with all of them except Anguilla and Guernsey. Guernsey currently has elections and its Parliament is not sitting, but we expect both those territories to follow in the coming days and months. For the first time, UK tax and law enforcement agencies will see exactly who really owns or controls every company in those territories. This Government’s message is clear: there are no safe havens for tax evaders, and no one should be in any doubt that the days of hiding money offshore to evade tax are gone.
The move is towards reciprocal agreements, but for the first time our law enforcement agencies and our tax authority, HMRC, will have access to information held about beneficial ownership. That is a significant step forward and must be viewed in the light of the fact that we have introduced the common reporting standard, meaning that much more information is provided automatically to our tax authority in respect of money held there.
I want to make a little more progress.
It is vital that we support businesses through low taxes. We must also ensure that tax is paid where it is due. This Government have set out a comprehensive package to tackle avoidance and evasion. In total this package will raise £12 billion by 2020-21. The Bill implements a number of those measures.
First, we are leading the way internationally by being the first country to adopt the OECD recommendations on hybrid mismatch arrangements. The Bill will introduce new rules to stop multinationals avoiding paying their fair share of UK tax through the use of cross-border business structures or financial transactions. It is estimated that this will raise more than £1.3 billion over the next five years. Secondly, we are ensuring that profits from the development of UK property are always subject to UK tax. This will level the playing field between UK-based and non-UK-based developers and raise £2.2 billion in revenue by 2020-21.
Finally, we will target the unfairness that many small businesses feel when they compete against companies on the internet. Overseas sellers are evading between £1 billion and £1.5 billion of VAT each year on sales to UK customers via the internet, unfairly undercutting British business and abusing the trust of UK customers. The Bill will provide stronger powers to require overseas sellers to appoint a UK tax representative who can be made liable for the VAT owed. This is part of a package of measures designed to level the playing field for firms trading in the UK. Once again, this Government have introduced a Bill which makes it clear that everyone has a responsibility to pay the tax they owe.
I am grateful to the Minister for giving way, and grateful for the Prime Minister’s and the Minister’s announcements today on tax. May I make two suggestions to the Minister? One is that the UK, through HMRC, should consider adopting the US model that requires taxpayers to list as part of their tax return all foreign bank accounts where they hold more than a minimal amount of money. That would force UK citizens to list those bank accounts that they might hold in other jurisdictions. Secondly, would the Government consider looking into worldwide taxation of earnings, which the US has? That would force UK passport holders to decide whether they want to pay UK taxes for the privilege and security of holding a passport.
I am grateful to my hon. Friend for those suggestions. We are not persuaded by the move towards worldwide taxation. On providing information about offshore accounts, if tax is due, people have to provide that information. It is worth pointing out that we are moving into a different environment where it is that much easier for HMRC to obtain information about foreign bank accounts, and it is much, much harder to evade tax, thanks to the common reporting standard and the progress that we are making on beneficial ownership.
The Finance Bill provides opportunities for households. It supports British firms seeking to create jobs and growth, and it ensures that businesses pay the tax that they owe. At a time when storm clouds are gathering on the global horizon, it is right that we do all we can to make our economy strong and secure, to put stability first, and to ensure that the UK remains fit for the future. That is what this Finance Bill does, and I am delighted to commend it to the House.
We have just had a speech from the Financial Secretary which puts a very positive spin on the Finance Bill. Although he sought to put a positive spin also on the measures announced by the Prime Minister today on tax avoidance, his speech shed no further light on the critical issue of offshore trusts and the need for a public register of beneficial ownership. It fell far short of the measures that we announced today in our tax transparency and enforcement programme.
The House is back after three weeks of turmoil at the top of the Tory Government which has called into question the competence and credibility of the Prime Minister and his senior Ministers. They were in trouble even before the Business Secretary’s inept handling of the crisis at Port Talbot. Since then we have had a week of ducking and diving from the Prime Minister over revelations in the Panama papers. What the Prime Minister showed today was that he and his colleagues can get top marks for talking the talk, but when it comes to walking the walk their scorecard is far less impressive.
The Bill seeks to put into law the tax-related measures set out in the Budget, and what a Budget it was. The author of the omnishambles surpassed himself and delivered a mega-shambles. No Budget has unravelled as quickly or as comprehensively as this one. It was a Budget that failed to add up. As we begin to debate the Bill, we do so against the backdrop of a huge, gaping black hole, with estimates of a figure of £12 billion or more that has yet to be funded. The Chancellor was faced with the real prospect of a revolt and his Budget not passing. Within days the main revenue-raising policy—cuts in personal independence payments for over 300,000 disabled people—proved too much even for the Work and Pensions Secretary. His parting shot, aimed at the Chancellor, complained of a Tory Government heading in a direction that divides society, rather than uniting it. The Budget and this Finance Bill have unfairness at their very core.
We will be voting against the Bill tonight, because it fails the fairness test and the test of adequately investing for our future. The Bill cuts corporation tax, which is already the lowest in the G7, while the Budget cuts support for working people, leaving over 2 million families, on average, £1,600 worse off a year by 2020. The Bill cuts capital gains tax, which benefits the wealthiest, at a time when the Chancellor has failed to meet his own deficit and debt reduction targets. How can it be fair, at this time, to fund tax breaks for his friends on the backs of the poor and the vulnerable?
Growth has been revised down last year, this year and every year of this forecast, and so too have business investment and productivity. The Chancellor is set to miss his export target by more than 14 years. Growth in average wages is being revised down while household debt is going up. He has admitted failure on his key targets. He has breached his own welfare cap. The Government are set to borrow £38.5 billion more than planned, and public sector net investment is set to fall as a share of GDP over this Parliament.
This is a recovery built on sand, and it is not just us saying it. The right hon. Member for Cities of London and Westminster (Mark Field) told readers of ConservativeHome that, for all the Chancellor’s talk about investment in export-led growth,
“the growth our economy has seen… comes courtesy of debt-fuelled consumption and a renewed housing and property boom.”
It is young people who are being punished by those choices. A recent YMCA survey of young people found that 41% said that debt was the biggest issue facing their family in 2016—so much for a Budget for the next generation.
The Chancellor has singularly failed to rebalance the economy, and that failure has implications for this Finance Bill. The Bill contains a series of tax cuts that he simply cannot afford. The £12 billion estimate does not include new figures published in an answer to a written parliamentary question, revealing that the Tories’ plans to force every school to become an academy could cost £1.3 billion, yet just £140 million was allocated for those plans, leaving a funding shortfall of more than £1.1 billion.
Before the Government seek once again to hide behind the turbulent conditions in the world economy, as the Minister attempted to do, let us be clear that most of the problems are of the Chancellor’s own making. We needed a Finance Bill that builds the foundations of a strong economy and that is the basis for prosperity and security for Britain’s families and businesses. We did not get it. Of course, there are some positive measures, such as anti-avoidance measures and industry support measures, that we broadly welcome. Support for the oil and gas industry and the quality of apprenticeships— 30% of apprentices currently appear not to complete their apprenticeships—are issues that we will want to explore further, along with tackling frequent tax avoiders. But these measures do not go far enough, as I will highlight later.
There is little good news for manufacturing, and no coherent overall industrial strategy, which of course includes the needs of the steel industry.
The hon. Gentleman says that I am in a positive frame of mind. I normally am, but I am just very concerned about the economy. Perhaps he will raise the Resolution Foundation’s finding that, as a result of the measures in the Budget, the poorest 20% of the population are set to be £565 worse off, while the richest 30% are set to be £280 better off. Perhaps he will think about his constituents and how they are set to suffer as a result of the Budget before he makes another intervention.
I was talking about the steel industry.
I will just continue on steel, because it is important also to talk about what is missing from the Bill. This is a serious missed opportunity to provide greater support for manufacturing and steel. The collapse of the steel industry could cost the Government £4.6 billion over the next 10 years. Some 40,000 jobs could be lost, devastating steel-making communities and industries that depend on British steel.
We welcome today’s news that a buyer has been found for Tata’s Scunthorpe steel plant, and we congratulate Unite, Community, the GMB and others who played an important role in the negotiations leading to that deal. However, against that background comes the revelation of a U-turn on business rates by the Chancellor. Before the Budget, the Engineering Employers Federation made a strong case for giving companies an allowance on business rates for plant and machinery, which could have applied to assets such as the blast furnaces in the steel sector. However, we learned from The Times that although the Chancellor was planning to act, he then pulled plans to give Britain’s struggling factories tax relief on business rates.
Why did he do that? The answer, analysts suggest, is that British manufacturing has been sacrificed on the altar of the Chancellor’s obsession with getting a £10 billion Budget surplus in the final year of this Parliament. We wait to see what actually materialises from today’s statement and what actual support comes forward from the Government, particularly for Port Talbot.
The Office for Budget Responsibility revealed that the decision was taken so late that there was no time to change the calculations in its economic and fiscal forecast. That means that its forecast for the level of business investment in this Parliament could well be an overestimate.
Families in Britain are to suffer as a result of another missed opportunity—on housing. By 2025, nine out of 10 Britons under 35 on modest incomes will not be able to afford a home. Rents in the private sector are soaring. So much, again, for a Budget for the next generation.
On that subject, the hon. Lady will be aware that the Residential Landlords Association put forward to the Government some ideas for changes, but those have not happened. One was to give people the chance to buy their houses, and the association was happy to do that, but we have not got that in the Bill. Does the hon. Lady feel that something could be done on that to help?
The hon. Gentleman makes an important point, and there are many measures we should explore, particularly as we go into Committee, to support house building and home ownership.
We know from the English housing survey that 201,000 fewer households own a home now than did at the start of the Chancellor’s tenure. That compares with an increase of 1 million under Labour. As of last year, the housing benefit bill is forecast to be £350 million more than the Chancellor intended. It is clear that this country needs a massive programme of capital investment in new affordable homes to rent and buy—nothing less will do if we are to tackle the growing housing crisis. That is why Labour has far more coherent plans to build homes and to make sure we tackle spiralling housing costs. That is the way to control the housing benefit bill.
Today’s report from the Women’s Budget Group shows that female lone parents and single female pensioners will, on average, have seen their living standards fall by 20% by 2020. Women are now set to bear a staggering 86% of the cost of changes and cuts to taxes, tax credits and benefits by 2020. That is worse than the figure of 81% identified last year.
The tax cuts in the Bill are likely to benefit men more than women. It is surely time that the Government conducted a full gender impact analysis of their proposals. That would give the opportunity for greater parliamentary scrutiny.
When it comes to measures on capital gains tax and corporation tax, the Bill must pass two tests: are they fair and are they effective? The Bill confirms that the main rate of corporation tax will be cut further to 17% from 1 April 2020, which will be worth £945 million. If corporation tax, which is already the lowest in the G7, can be reduced yet further, perhaps money can be found and the Government can think again about cuts to working age benefits and public services.
More importantly, a cut to corporation tax will not address the underlying weaknesses of our economy, such as the challenges in productivity, skills and the investment required in infrastructure. Businesses that talk to the Minister as well as to us say that these are the biggest issues affecting their future growth. Connectivity and new technology also require investment.
The response from the Federation of Small Businesses contradicts what the hon. Lady has said. It said:
“The decision to further lower corporation tax to 17% in April 2020 is an important statement of intent and will provide a boost for affected firms.”
The hon. Gentleman certainly does not seem to have the same sort of direct conversations as I do with businesses. This is a question of choices and timing. They also raise the issue of housing, which affects the stability of their workforce, and of infrastructure investment, which affects access and their opportunities to grow. Investment is also required to support the scale-up of their businesses through developing skills. There is a whole host of issues. This is also about judgment, timing and what would be most effective in increasing our productivity.
Is the hon. Lady aware that there is ample evidence in the United States and the UK that large amounts—possibly half—of the retained earnings from lower corporation tax actually go into share buybacks, and that those share buybacks, which end up in the pockets of the original shareholders, do not get reinvested in industry, but go back into property and other kinds of non-productive assets?
The hon. Gentleman makes a very important point. That is one of the concerns. It is assumed that the proceeds from those tax cuts will go directly into investment, but the evidence for that does not necessarily stack up. In fact, an estimated £500 billion is not invested in this country at the moment. That is an important point, which is why greater analysis and scrutiny are required, as well as conversations with businesses about what will actually make a difference for them in the long term.
The basic rate of capital gains tax is to be reduced from 18% to 10%, and the higher rate from 28% to 20%. That is set to cost £735 million in 2020 and £2.7 billion over the forecast period. Capital gains tax was paid by only 200,000 taxpayers in 2013, which means that about 0.3% of the population will benefit from a giveaway of more than £600 million in total from the first year. That was not called for or expected. In fact, the Financial Times described it as an “unexpected gift” for wealthy investors. In 2010, the Chancellor told the House that raising capital gains tax was necessary to
“create a fairer tax system.”—[Official Report, 22 June 2010; Vol. 512, c. 178.]
It would be interesting to hear perhaps during the Exchequer Secretary’s wind-up speech what has changed.
The Residential Landlords Association was keen to see the extension of the capital gains tax relief so that landlords could sell property to their tenants. That is a small thing that could incentivise the whole housing market if it was done in the right way.
I thank the hon. Gentleman for his comments, but I think he will agree that the key issue in addressing the housing crisis is the rapid building of new homes and the strategy to deliver that effectively.
I want to make a few comments about entrepreneurs relief and the Government’s new investor relief. We welcome the endeavours to encourage investment, particularly long-term investment. The question will be whether the measures pass the test of what business is looking for: simplicity, stability and a strategic approach to fiscal policy. Our concern is that tinkering is no substitute for a clear, long-term strategy to support investment. That is why we are undertaking a review of tax reliefs to see what the evidence is for what incentivises business investment and provides real value for money. Our aim is to ensure that there is a strategic approach to supporting investment and the transparency around it. Those are questions we will pursue as we go forward into Committee.
We also welcome clauses on the reduction in oil and gas corporation tax and petroleum revenue tax. The Chancellor announced that he would reduce petroleum revenue tax from 35% to zero, and that he would reduce the corporation tax supplementary charge from 20% to 10%. There is no doubt that the struggling North sea oil and gas industry needs support. In fact, we think that the Chancellor could have gone further and announced the measures that Labour has called for. Our bold new proposal to invest in the industry is based on the creation of a new public body, which would be called UK Offshore Investment Ltd, to identify areas for temporary public investment. The purpose of that new body was spelled out last month by the Scottish Labour leader, Kezia Dugdale. It would conduct an open-book review with the Oil and Gas Authority to identify assets that have long-term viability and profitability. That, in turn, would provide the evidence to allow UK OIL to commit to public investment in strategic infrastructure and potentially profitable assets.
Clause 115 gives the Government power, through a statutory instrument, to reduce the VAT rate on women’s sanitary products from 5% to zero. That is welcome, as are the Minister’s comments. I am glad that the Chancellor has finally recognised that women’s sanitary products are not a luxury. However, it is crucial that the clause should set a firm deadline for the VAT reduction, and although the Minister’s comments signalled moves in that direction, they did not go quite far enough. I am sure that we will continue to address the point as we move forward in Committee and beyond. I congratulate Labour Members, particularly my hon. Friend the Member for Dewsbury (Paula Sherriff), and campaigners inside and outside Parliament on their hard work in forcing the Government’s hand on the issue. It is a sad indictment of the Government that it took a Labour amendment and an embarrassing Government defeat to achieve that result.
Where in the Finance Bill is a clause to reflect the Government’s other U-turn, which was on VAT on energy-saving materials? The Government accepted our amendment to the Budget resolution, which allowed the Government to legislate on the matter in the Finance Bill. The lack of legislation and the contradictory and noncommittal answers from Ministers are causing uncertainty in the industry. We simply call on the Government to make a commitment that they will not include a VAT rise for solar or other green energy measures in this or future Finance Bills.
On tax avoidance, the two key issues we face are structural reforms and public confidence. The rhetoric today, as in the past, has sought to be impressive—in the past, the Chancellor has said that aggressive tax avoidance is “morally repugnant”—but the reality has yet to match the rhetoric. Indeed, the tax gap has grown under this Government to £34 billion. Serious measures to tackle tax avoidance, which is estimated to account for £7 billion of the tax gap, will be even more critical.
It is two years since the Prime Minister wrote to UK overseas territories and Crown dependencies calling on them to publish a public register of firms and individuals sheltering money there, yet virtually no progress has been made so far. Today’s statement did nothing to move us forward on such a public register of firms and individuals. Fundamentally, this issue is about a rotten system that undermines the faith of ordinary families in the fairness of our tax system. Indeed, a definitive analysis by the Financial Times shows that the corporate tax avoidance measures that the Labour Government brought in will still raise 10 times as much as those introduced during the last Parliament.
While we broadly welcome the measures in the Bill, we think that they simply do not go far enough. We believe there must be far greater transparency and enforcement in relation to those who try to hide their wealth and profits in tax havens. As ever, the Chancellor and the Prime Minister give the impression of acting tough, while in reality they are proposing half-measures. Instead, as Labour have set out in our tax transparency enforcement programme, we require the introduction of a general anti-avoidance principle that proactively looks at intent and does not need the consent of the tax profession before it can be used.
Our programme includes an immediate public inquiry into the Panama papers, and more resources for HMRC. Staff numbers having been cut by 6,000 and then added to by 670, we can see that there has been a return of about 10% of those whose jobs were cut, and real concerns have been raised about the impact on tax collection as a result. We have called for a specialised enforcement unit and for greater co-operation with European partners on country-by-country reporting and protection for whistleblowers.
Far be it from me to make any proposals to Labour Front Benchers, but will my hon. Friend consider some research into the impact of the Liechtenstein disclosure facility and how it has been used during the past two to three years to subvert the Government’s attempts on taxation?
I thank my hon. Friend for his extremely well made comment. He is absolutely right that we should explore that area, because we want evidence about what works as we move forward urgently on the issue of gross tax avoidance and evasion. Indeed, if we want to ensure that tax avoiders and tax evaders pay their fair share of tax, the Finance Bill will need to be toughened up considerably. If the Chancellor fails to listen to our arguments, the public will want to know why.
The Bill also fails the fairness test. Resolution Foundation analysis shows that 80% of the gains from this Budget’s changes to income tax will be for the top half of the income distribution, with the top 20% of households getting the lion’s share. It estimates that, during this Parliament, households in the lower half of the income distribution will lose an average of £375 a year, while those in the top half are set to gain £235 a year. We are lucky that it can tell us that. It is a matter of shame that the Chancellor no longer produces his own full distributional analysis. This is a Chancellor who either does not want to know or does not want to tell us what impact his decisions are having. Neither competent nor compassionate—after the Budget, that is the verdict on this Chancellor.
This country faces huge economic challenges—automation, competition from nations such as India, China and other growing economies, our grossly imbalanced economy and our growing current account deficit—yet faced with these big challenges, what do we get? We get cuts to corporation tax that the Office for Budget Responsibility says will do nothing to reverse the deteriorating outlook for business investment, productivity and exports. There are cuts to capital gains tax that will benefit a tiny minority but do nothing for the millions of working people struggling simply to stay out of debt, let alone save for a home or a pension. There are clever accounting tricks aimed at reducing the Chancellor’s short-term political embarrassment that do nothing to secure our long-term public finances or economic stability. Missing was a clear vision of the future—a vision of a Britain that has a strategic partnership between Government and business, and is stronger because prosperity is shared more fairly.
We will vote against this Finance Bill because it is unfair. It is unfair on women, on low-paid workers and on children living in poverty—the number of children in poverty has increased by half a million since this Government came to power. These are people who are seeing their living standards cut to pay for the Chancellor’s tax giveaways to the better off. The Bill is unfair on the workers in our steel and manufacturing industries, who are worried now about their jobs and their families. It is unfair on all the hard-working families and responsible businesses that play by the rules and pay their fair share of tax. We will vote against the Bill because it fails the test of moving this country forward to a more prosperous and secure future for Britain’s businesses and families.
I am grateful to be called so early in the debate. I strongly support the Bill, which will encourage saving, reward work, encourage business investment and tackle aggressive tax avoidance. Those things are exactly what we want to see in a Finance Bill and they are all in this one.
Given that, I cannot understand why anyone would choose to vote against the whole Bill. It seems to be largely because of the changes to capital gains tax and corporation tax. I will go back as far as Gordon Brown’s first Budget after becoming Chancellor, in which he effectively introduced a 10% capital gains tax rate and reduced the corporation tax rate. Perhaps we can remember when we had a Labour Government who at least tried, in the early years, to be friendly to business and encourage investment and growth in this country.
That was a peril of coalition and a Lib Dem insistence that I am sure we regret strongly, as it appears not to have increased capital gains tax revenues in the way that was intended. It is quite right to move the rate back down to a more sensible level in the responsible way that that has been done.
We should note that every year we have a Finance Bill, and they are quite long, thick and heavy. We keep adding a load of new and complex clauses to our tax system, which is still just behind the Indian one for complexity. I do not think that we have a record length Finance Bill this year, although the Government achieved that twice in the previous Parliament. At some stage, we have to find a way of getting off the merry-go-round of further complicating our tax system every year. We even have a new record now—of adding a new tax every year. We had the diverted profits tax last year; this year, we have the apprenticeship levy, which the Bill recognises is actually a tax. Although those two measures are welcome, we are further adding to the complexity that people have to deal with.
A welcome step in the right direction is that we are making the Office of Tax Simplification a permanent feature of this arena. However, we need to free that office up to do more long-term, high-level strategic work rather than having to focus on what can at times be quite small features of the tax system, which do not affect all that many taxpayers. As the Minister said, it has done good work on small business taxation, but we really need the office to work out how we can simplify the big taxes we have, to make them easier to comply with, make it easier for HMRC to enforce compliance, and make those taxes less burdensome. That was my reasoning, in the previous Parliament, for why we should make the corporation tax system follow accounts, and focus the resources we have on transfer pricing and abusive avoidance arrangements, rather than having to inquire into whether a certain item was capital or revenue, or whether a certain entertainment allowance was right.
Such long-term strategic directions to simplify the system would bring in far more revenue and make the system far more attractive. I hope that the Bill will allow the OTS to choose its own work in some situations. Perhaps it will be encouraged to consider some fundamental simplifications, and not just suggestions made by the Chancellor from time to time.
On individual measures in the Bill that are welcome, the savings and dividends nil rates are an encouragement for people to save, and a welcome simplification of the tax system for many people who struggled to work out how the dividend credit worked and what tax rate they were paying. That moves us in the right direction regarding how we stop people incorporating themselves to get a tax advantage that is not intended by paying themselves dividends, and helps us to get to a fairer system in which people who are employed pay the right taxes.
Some issues have not been raised. For example, the peer-to-peer lending rules are leading the world in encouraging the financing of businesses that cannot get normal financing from banks. There are also welcome anti-avoidance rules such as the withholding tax changes to try to stop treaties being abused so that companies avoid paying the withholding tax they should be paying in paying fees to tax havens.
The Bill does not contain some measures that I would like to be included. For example, we must accept that there is a widespread lack of confidence among the public that our largest corporates are paying all the taxes in this country that they are supposed to pay. I suspect that most of those companies are paying their taxes and that a relatively small proportion are engaging in aggressive avoidance, but everyone gets tarred by the same brush. The measures that we have introduced in the past five or six years to tweak things or introduce new rules and so on, are not tackling the fundamental lack of confidence in the system, which is why we need more transparency from large companies.
We should make large companies publish their tax returns so that we can see a calculation of how they have got from the profit they report to the tax they pay. We should know which companies have made aggressive calculations, or used strange reliefs or funny payments that we do not understand, and which are paying the right amount and happen to have losses brought forward or capital allowances that they have not used. That would boost people’s confidence and we would not see stories every few months about another large multinational that has done something that it should not have done, or done something entirely reasonable, but we do not know because such details are not in the public domain. It would help to move this debate forward if those large companies were more transparent.
Companies have to disclose many things about their directors, investment strategies and business practices, and I do not think that a little more transparency about tax affairs would put much more commercially sensitive material into the public domain. Instead, it would boost people’s confidence. I hope that large companies that are complying with the rules would want to do that—they should not be scared of doing so. If they are using existing rules and incentives for the use that they were intended, that is welcome and something that we all understand. Perhaps the one thing that we can do domestically would be to take this debate forward so that we are confident that our largest companies are doing what we want them to do, and not doing things that they ought not to be doing. With that plea, I welcome the Bill and will be voting for it this evening.
This Bill follows in the wake of yet another Budget that began to fall apart within a few short hours of the Chancellor’s statement—indeed, perhaps his future statements should be entitled, “Not the Budget”. If the Budget created disarray on the Government Benches, this Bill, with its clamjamfry of unco-ordinated clauses, presages yet more failure and demonstrably fails to address some of the major economic challenges of our time.
I admit that it was a great joy to read all 580 pages of the Finance Bill over the recess, and although I will come to a number of specific issues and technical problems, the Scottish National party has one overriding message for the Government: you cannot build economic success on the back of social injustice. Every social injustice is a hammer blow to economic progress. In recent times, we have seen the ways in which this Government wanted to place further injustice on the shoulders of the disabled, the disadvantaged and the 1950s-born women while at the same time operating an economic system that disproportionately protects and enhances the privileges of the most wealthy in society. Creating such division does not bring progress.
I said in my maiden speech, quoting Adam Smith:
“No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable.”
Times move on, of course, and reflections on our current predicament can best be summed up by Professor Stiglitz, who said:
“Rather than justice for all, we are evolving into a system of justice for those who can afford it”.
I am confident that hon. Members will be able to rehearse many instances of social injustice created by this Government, so allow me to move on and reflect on an issue that I raised in the House on 3 February this year—namely, the problem of tax evasion, particularly through the use of tax havens in British overseas territories. Little did I know at the time how prescient that debate in February would prove to be.
I have to say how disappointing I found the Prime Minister’s statement earlier today, despite its containing one or two modest proposals that I welcomed. Let us put this into context. According to Jason Hickel of the London School of Economics, tax havens hide one sixth of the world’s total private wealth—in excess of $20 trillion. I have already commented elsewhere that the revelations in the millions of papers that have been released from Mossack Fonseca are but the tip of a gigantic iceberg. Indeed, Panama does not even make it into the top 10 tax havens. Taken together, Britain and her overseas territories are at No. 1, outdoing Switzerland by some margin. Commenting on a single address in the Cayman Islands, Ugland House, President Obama said:
“That’s either the biggest building in the world or the biggest tax scam on record”.
It is not surprising he said that, given that 19,000 businesses are registered at that one address. It is a big hoose, as I said in February.
At least four major issues relating to tax havens need addressing. The first—the subject of much current debate—is the extent to which the makers of laws and the guardians of the wider public interest are themselves benefiting from tax scams. This is an understandable issue of concern, but we fool ourselves if we think that that is the sole or primary issue. It does, however, have regard to openness and transparency. I agree with my right hon. Friend the Member for Moray (Angus Robertson) that it would be a positive and welcome move if Cabinet Members, as well as the Prime Minister, were to choose willingly to open up their tax returns to public view.
The second issue, which deserves more focus, is the avoidance of tax. I deliberately say “avoidance”, because that is of course legal. It strikes me, however, that for the average member of the public, it is not a convincing defence for the type of institutional behaviour that we have witnessed in recent times, including from large multinational corporations, to say, “It is legal”. I am sure that I am not the only new MP to have been subjected to huge lobbying by corporations and other financial bodies. They mobilise vast resources to “help” the Government and they are very successful. They have managed to influence the creation of an international system of finance that enables tax avoidance on a huge scale. Not only that, but they happily operate a system that hides from scrutiny the owners of vast wealth, while the ordinary man in the street has no such luxury.
The third issue, which has surprisingly been the subject of much less scrutiny so far, is the extent of the evasion of disclosure of the source of money itself. There are good reasons to suppose that it is not only corrupt political leaders but drug traffickers, terrorist organisations and other types of criminals who inhabit the shady world of international finance. Sadly, the Panama papers suggest that some legally registered institutions may have colluded in the protection of criminals who stash their cash behind anonymous, untouchable trusts and other financial vehicles. I hope we can take it from the Prime Minister’s statement today and from the Minister’s welcome remarks earlier about making it a criminal offence for some types of such “advice” to be proffered by otherwise legal institutions that we will see considerable progress on this matter.
The fourth issue I wish to raise is where these funds are and how they are set to work for their beneficiaries. As we know, these funds do not actually sit in Panama, the British Virgin Islands or the Cayman Islands. One of their biggest centres is, as we know, London. For example, hundreds of very expensive properties in London have been brought by unknown persons. We need transparency here, too. Some, like my hon. Friend the Member for East Lothian (George Kerevan), have argued that it should be illegal to own property or land in the UK where the beneficiary is unknown—a breathtakingly simple measure to address a cause of great concern.
All this calls for radical reform in each of those four areas, but I am sad to say that neither the Finance Bill nor the Prime Minister’s statement earlier goes nearly far enough to inspire any confidence that the matter will be adequately addressed. It is very disappointing, for example, that the Prime Minister continues to resist calls to do something about trusts. Even if he was right in his interpretation three years ago about how to proceed, this is three years later and public perceptions throughout the world have changed radically. It is time to broaden the scope of action.
The truth is that while this Government, through this Finance Bill, are taking feeble measures to tackle tax evasion, at the same time, in an act of social and economic injustice, they are mounting an attack on small individual contractors who serve rural communities, preventing them from having travel expense relief. These people are not tax dodgers; they are flexible workers, with both private and public clients, who are essential to many rural communities in Scotland. Yet at the same time as these people are attacked, the Government are protecting tax dodgers and millionaire Tory donors by continuing to allow huge loopholes in the system. We must get a commitment to a more open and transparent system that involves all overseas territories, trusts as well as companies, and full and independent scrutiny of the so-called Panama papers.
There is scope in Committee for the Government to be much more ambitious and to present new clauses for debate. They can be assured that it is certainly our intention to do that. Furthermore, the claim that this Finance Bill will adequately address other tax dodges lies in ruins, when we consider its implications for the so-called Mayfair tax loophole. We do not believe the Finance Bill makes anything like sufficient progress in its treatment of so-called carried interest, which is seen by many members of the public as another example of one rule for those with modest means and of huge favours being given to those of considerable wealth and income. Again, this is an area we shall pursue in Committee.
I turn now to wider economic matters. In his 2012 Budget speech, the Chancellor acknowledged Britain’s falling share of world exports and stated that
“we want to double our nation’s exports to £1 trillion this decade.”—[Official Report, 21 March 2012; Vol. 542, c. 797.]
Jings, he can certainly dream can oor George! However, the figures are moving in the wrong direction, and the Chancellor is likely to fall short of his target for £1 trillion in exports by 2020 by at least some £300 billion.
Indeed. Failing to meet targets is of course one of the great characteristics of the Chancellor, but to miss it by such a huge margin creates a new category of failure—a right bourach, perhaps. Furthermore, rather than making even modest progress, we find that in the last three months of 2015, the UK had achieved a record-breaking near £33 billion current account deficit.
Part of our declining relative performance speaks to a long-term failure to address adequately the central issue of productivity in our economy. On productivity, this Finance Bill fails to address fundamental concerns. Raising levels of productivity is essential to raising growth in the economy. As my hon. Friend the Member for East Lothian pointed out on 22 March, developed countries with higher levels of growth, including Australia, Sweden, Spain and the United States, to name only some,
“experienced faster…growth than the UK in 2015, largely because they experienced faster productivity growth.”—[Official Report, 22 March 2016; Vol. 607, c. 1412.]
We need productivity growth, too, to enable the cash economy to grow, to enable wage growth and to grow tax receipts.
There are many factors, of course, that affect productivity growth. Some are well known and relatively uncontroversial —areas such as investment in research, development, innovation, and of course, infrastructure. In these areas, the UK lags well behind many of our major competitors. On a number of occasions, I have pointed to the relative decline in investment in R and D compared with our G8 competitors. As things stand, we are bottom of the G8 on R and D spend from both private and public sources, and there has been a reluctance, to put it mildly, to raise infrastructure spend to the necessary levels.
The SNP believes that in order to achieve a sustainable future, R and D expenditure and investment could benefit from a comprehensive, dramatic and territorial review, and that there should be increased planned infrastructure spend beyond the narrow confines of London and the south. As for skills, the subject has already been raised by the hon. Member for—
Correct! I am delighted that the hon. Gentleman remembered. He referred to the importance of skills, which are of course fundamental to productivity growth. For some 30 years, the UK has been failing, particularly at the intermediate and higher-intermediate skill levels.
Let me come on to another iniquity in the Bill: the continuing failure to relieve Scotland’s police, fire and rescue services from the burden of VAT. The Government’s excuses on this are well rehearsed, but they are hollow words. Their actions confirm that, rather than supporting the police and fire services in Scotland, the Tories are their enemies.
This Finance Bill rides uneasily alongside the Chancellor’s statement to the House on that
“we are going to deliver a strong and compassionate society for the next generation”.—[Official Report, 22 March 2016; Vol. 607, c. 1388.]
I do not know a single young person or couple that will be able to take advantage of raising the amount that can be invested in an ISA to £20,000 a year. I do know, however, all too many constituents, many of them young, who live on take-home pay that is much less than £20,000 annually.
The actions of this Government are not building a strong economy for the future and are certainly doing nothing to create a compassionate society. This Government and this Chancellor are not merely failures; they are purveyors of misery.
This Finance Bill will go a long way to ensuring that there is no thumb on the scales that balance the interests of small businesses and multinational companies. In that sense, it is a Budget of direct redistribution, but there are ways of extending that principle further. The £9 billion gained through restrictions on interest deductibility, the strengthening of withholding tax and the hybrid mismatch rules all mean that a great deal will be ploughed back to provide support for small business. That is great news for someone such as me, coming here after a career in small business and now chairing the all-party groups on small business and on micro-business. In fact, anyone who has run a small business will know that business rates can take up an intimidatingly large proportion of fixed costs. The changes in those, together with the cut in corporation tax, are very welcome, recognising both the value of small businesses as employers and the fact that they are the engine of growth.
I think that the revised business rates will be of enormous benefit to companies in the glorious south-west, where small businesses are not just economic units, but power the communities that surround them. As well as, apparently, having more cows than any other constituency —of which we are very proud—Somerset and Frome consists of a constellation of 140 small towns and villages, many of which pivot around, and depend on, a single company or enterprise. For that reason, we need to recognise the significance of the number of jobs that have been created in the last six years, and the fact that there has been more rapid growth in jobs than at any time since the second world war. That is not just some abstract figure, but a reflection of tangible improvements in conditions for local businesses, and, therefore, for the people who depend on them.
That entrepreneurial spirit also shows itself in the so-called sharing economy, another economic sector that greatly helps those in rural areas. The tax-free allowance of £1,000 for online micro-entrepreneurs is a small but welcome step. A number of community energy and transport projects in my constituency will benefit from those incentives, and from the fact that the allowance recognises the important role that they play. Of course, a great deal more can be done. However, a Budget is not a governmental wish list, but an opportunity to match aspiration with reality.
Along with, I am sure, many Members in all parts of the House, I have recently received a fair bit of correspondence suggesting that reducing foreign aid would give us more scope for domestic expenditure. That is certainly true in purely economic terms, but what would be the moral cost? As of last year, the money provided through British foreign aid has vaccinated 55 million children against preventable diseases, given 50 million people the means to work their way out of poverty, saved the lives of 50,000 women in pregnancy and childbirth, and helped to prevent a colossal 10 million children from going hungry. We must, of course, take every possible step to ensure that the money goes to the vulnerable rather than to some kleptocracy or other, but that is a question of means rather than ends. We are the fifth richest country in the world, and I believe that our continuing commitment to foreign aid is a recognition of the humanitarian duties that accompany such a position of relative strength.
I think that the Bill’s approach is hugely positive. It incentivises and empowers individuals and small companies, properly addresses corporations that skip around in the no man’s land between tax avoidance and evasion, bridges the gap of generational unfairness with the lifetime ISA, and reaffirms our commitment to those who suffer from abject poverty abroad, while continuing to facilitate our economic recovery at home.
During one of the debates on the Budget, my hon. Friend the Member for Tiverton and Honiton (Neil Parish) summarised the priorities for the south-west as
“Rail, road, housing and broadband”.—[Official Report, 17 March 2016; Vol. 607, c. 1144.]
I could not agree more, and I am delighted to see the recognition of all those priorities in the financial measures that the Chancellor has set out.
I should also mention the commitment of half a billion pounds to speed the introduction of a fair national funding formula for schools. Many of us have campaigned for such a formula for some time, and it will benefit many schools in my constituency. There has been a long-term imbalance, and it is a relief to see the Chancellor commit himself to righting it.
Despite international pressures, our economy continues, by any comparative measure, to develop strongly. I believe that the Bill will enable small businesses to go on powering the jobs, and therefore the growth, on which we really depend.
In 2010, the Chancellor promised us a new growth model based on higher savings, investment and exports. However, notwithstanding what we have just heard from the hon. Member for Somerton and Frome (David Warburton), those fundamentals, which underpin the economy and are the backdrop to the Bill, are not going as well as we might have hoped. Our national savings ratio has hit an all-time low of 3.3%. In the latest figures, investment has been revised down, with a staggering £87 billion wiped off forecast business investment since last November, and public investment is falling as well. Our export performance has deteriorated further, with the gap between the Chancellor’s 2020 target for a trillion pounds-worth of exports and the OBR’s expectations now widening to £357 billion. That is before we factor in the calamity that the Government have allowed to unfold in our steel industry or the enormous risks to our economy created by putting our membership of the European Union in question. Indeed, just a few weeks after the Budget statement, we have seen even more bad news about not only steel, but the manufacturing sector in general and the worst balance of payments figures that the country has seen since the second world war, with the deficit in the fourth quarter of 2015 reaching a staggering 7%.
All that has an impact on living standards. On top of the downward revisions that we saw in November, expected earnings have been revised down in the forecasts for every single year of this Parliament. Looking at the deterioration in expected earnings since the Budget just after the general election, the OBR forecasts that the average UK worker will be £823 a year worse off by the final year of this Parliament. Following the downward revisions, the total loss over the course of this Parliament is £2,000, the impact of which will be felt most by those on low and modest incomes. Indeed, because the national living wage is linked to average earnings, somebody on the minimum wage will be £600 a year worse off than when the Government originally announced it. In less than a year, the average worker will be £2,000 worse off over the course of this Parliament and somebody on the minimum wage will be £600 a year worse off compared with what the Government originally announced.
Against that background, one might think that a Chancellor who once proclaimed that we were “all in this together” would want to use the Budget and this Finance Bill to target help towards ordinary working families and the low-paid. Instead, we have a package of measures before us that disproportionately benefit the better-off, rather than those who most need support. Let me give three examples. First, fewer than one in five taxpayers will gain from the £2 billion cut in higher rate income tax in clause 2. Those who will gain will also receive the largest benefit from the expensive and poorly targeted increase in the personal allowance in clause 3. The 4.6 million lowest-earning workers in the country will receive no benefit at all from either change. At a time when the earnings of those on middle and low incomes are being squeezed and public finances remain extremely tight, raising the threshold at which people start paying the higher rate of income tax is the wrong priority.
Secondly, the cut in capital gains tax in clause 72 will cost taxpayers more than £2.7 billion over the next five years, but directly benefit only a tiny minority. Just 130,000 individuals will share the gains, the majority being higher rate taxpayers. Around half of capital gains tax is paid by just 5,000 individuals who will therefore receive a windfall and get the bulk of the advantage, so the benefits of this tax break will be pocketed by a relatively fortunate few. Again, that is not the right priority when the living standards of ordinary people are being squeezed and when our public finances are so stretched.
The Chancellor would no doubt protest that that is a price worth paying for the entrepreneurial energy that the capital gains tax cut will unleash, but the official documents reveal that the OBR has made no upward revisions to its forecasts for investment, productivity or growth as a result of the measure, which will cost £2.7 billion. Indeed, the most likely impact of the move will be to increase the incentive to avoid tax by converting income to capital gains. Perhaps the Chancellor has been taking advice from the Prime Minister, who seems to have enjoyed the benefit of some careful tax planning. But, again, I would argue that with squeezed family finances and tight public finances, this is neither fair nor fiscally responsible.
Thirdly, as part of his Budget the Chancellor has chosen to increase the amount any individual can contribute to a tax-free savings account to £20,000 a year, as the hon. Member for Kirkcaldy and Cowdenbeath (Roger Mullin) mentioned. I welcome action to make it easier for ordinary workers and families to save, but we have to ask whether this approach should be the priority when most of our constituents are lucky to earn £20,000 a year and have anything left to save at all. In my constituency, average earnings are just under £20,000 a year, and many people would struggle to put anything aside, let alone take advantage of a £20,000 individual savings account limit. In the latest year for which detailed data are available, the average ISA subscription was less than £4,000 in the year. Fewer than one in 10 people who contributed to an ISA were able to save the maximum amount of just over £15,000, with a disproportionate number of those who did so having incomes above £150,000 a year. The trends of recent years suggest that as the Government have focused on raising the annual limit for ISAs, the total amount of cash put into ISAs has increased sharply even as the total number of people contributing to an ISA has fallen. In other words, this is moving ISAs away from their original purpose as a platform to support broad-based saving and investment, and increasing their use as a way to minimise tax liabilities for those with large amounts of cash to move around. That is having the wrong effects and the wrong people are benefiting. I support ISAs and tax-free savings, but only if they are there to support those people who need to save. What we are seeing is a falling savings ratio, with the most wealthy people being incentivised to save. We need to help those people on more modest incomes to put something aside for their future.
This Finance Bill, like those before it under this Chancellor, contains a long list of clauses ostensibly aimed at reducing tax evasion and avoidance. Anything that genuinely advances that end is to be welcomed, but we will judge the Government’s achievements not on the number of clauses in their Bills, but on the real progress made towards closing the tax gap and ensuring that everyone pays their share. I urge the Government to do more, by supporting, not blocking, measures in the European Parliament that strive to meet that objective.
The truth is that HMRC’s own figures show that the tax gap fell by £4 billion over the last five years of a Labour Government but has risen by £1 billion under the current Chancellor. The consequences of this Government’s refusal to take the necessary action on UK Crown dependencies—[Interruption.] I am happy to take an intervention instead of having the Minister muttering from a sedentary position.
I wonder whether the hon. Lady would like to comment on the percentage tax gap.
If the Minister is so concerned about the tax gap, why did his Tory MEPs block measures in the European Parliament to crack down on tax avoidance and why did the Prime Minister write to Herman Van Rompuy in 2013 asking for trusts to be excluded. As I say, instead of looking at the number of clauses in a Bill, we should judge the Government by their record, by their actions and by what is happening to the tax gap. Under Labour the tax gap narrowed but under the Tories it is widening. They need to make much more effort to ensure that people at the top and big corporations pay their fair share of tax, but that is not happening under a Conservative Administration.
I hope that I have demonstrated that this Finance Bill prioritises tax breaks for the wealthy at the same time as pulling vital support from the vulnerable and disadvantaged. The shadow Chief Secretary to the Treasury cited the Resolution Foundation. It has calculated that the tax and benefit measures already taken by this Chancellor since the election will cut the incomes of the poorest 30% by £565 a year, while increasing those of the richest 30% by £280 a year—and that is before we factor in the impact of any further cuts to social security needed to meet the Government’s welfare cap and fill the multi-billion-pound fiscal hole following their U-turn over personal independence payments.
During a sitting of the Treasury Committee I pressed the Chancellor on all of this, particularly the changes to disability benefits. All he would say was that he had “no plans” for further raids on the fragile finances of disabled people, low-paid workers or children living in poverty, but that gives very little reassurance to those who rely on social security because they are sick or disabled and cannot work, or because they are in low-paid work and struggle to make ends meet; nor does it reassure families bringing up children in poverty that the Government will not once again hit their family finances.
Perhaps even more problematic than the measures in the Bill are the measures that are missing from it. The House will remember that this was supposed to be the Finance Bill that reformed our unfair system of pensions tax relief. We spend £34 billion on pensions tax relief and 14% of that benefit goes to people earning more than £150,000 a year, even though they represent a tiny proportion of all taxpayers. Just 10% of the benefit from the relief goes to those in the bottom half of the income distribution. That is why I argued for a 33% flat rate of pensions tax relief, which would be fiscally neutral but fairer to families on ordinary incomes and those who are trying hard to put something aside for the future. It would also give a strong incentive to save by, in effect, providing a simple two-for-one offer: for every £2 people put into a pension, the Government would add another £1. At a time when wealth inequalities are widening, our savings rate is plummeting and the costs of an ageing society are increasing, that measure would provide a powerful incentive to save for millions more people and definitely help more people than a £20,000 ISA limit.
The Bill was also an opportunity for the Government to admit they had made a mistake and to reverse the Chancellor’s expensive and poorly targeted cuts to inheritance tax, due to be phased in from next year. The Treasury’s own leaked analysis confirms that the policy will
“most likely benefit high income and wealthier households”
concentrated in London and the south-east of England. It also states that
“there are not strong economic arguments”
for the cut, which will
“push up house prices and possibly rents”
“make it more difficult for younger households to buy a house.”
Yet that is a priority of this Government. Meanwhile, the overall cost is set to rise to almost £1 billion a year as the policy is introduced. I believe that the money could be much better used to help ordinary families who struggle to stay in work when their children are young by, for example, creating a universal childcare entitlement for children aged two. That would be a more prudent use of funds when family finances are stretched and so are our public finances.
I remember being shadow Chief Secretary to the Treasury in 2012, when we had what we dubbed the “omnishambles Budget”. This Budget has unravelled even faster than the 2012 Budget, with the flagship measure—changes to disability benefits—dropped and the changes to pensions tax relief dropped before they were even announced. The flagship measure in the 2012 Budget—the cut in the top rate of tax from 50p to 45p —stayed, but the flagship measure in this year’s Budget was dropped.
I believe that the Chancellor wanted to reform pensions tax relief, but could not do so because Tory MPs protested too loudly. Instead, at the last minute he decided to raid the disability budget, but then—after that was announced—recognised that it did not really fit with his rhetoric of, “We’re all in it together.” That is why the Budget has unravelled so quickly, but most important—well, not the most important—it is why the political prospects of the Chancellor have unravelled so quickly as well. The highest price for this Budget will be paid by ordinary taxpayers, working families and future generations. That is why I and my colleagues will vote against the Bill this evening. It represents the wrong priorities for our country.
I am grateful for the chance to follow the characteristically thoughtful and hard-hitting speech by the hon. Member for Leeds West (Rachel Reeves). As she knows, I respect her and her experience, but there is no question but that a tax is required on the sugar in that speech, which was too sour on this occasion. I prefer the analysis of my hon. Friend the Member for Somerton and Frome (David Warburton).
I congratulate the Government and Treasury Ministers on the Bill. Before I explain why, I congratulate my hon. Friend the Member for Kingswood (Chris Skidmore), the Chancellor’s Parliamentary Private Secretary, on the recent addition, Henry, to his family. We are all grateful on this side of the House for his safe arrival.
It is a pleasure to speak in an important debate on an important Finance Bill, which builds on the success of the Government’s long-term economic plan and takes a number of long-term measures that will make life better and more prosperous, not just now but for future generations. It supports savings for lower earners, with the introduction of the savings nil rate in clause 4, as promised in the autumn statement. The measure excludes the highest-earning additional-rate taxpayers but allows for up to £1,000 of zero-rated savings income for basic rate taxpayers, and only up to £500 for higher-rate taxpayers. That adds to other measures that the Chancellor has put in place such as lifetime individual savings accounts, which were announced this year, and the help to buy ISA, which rightly focus on younger savers.
The Bill works to support further fiscal stability, with necessary uprating in gaming duty in clause 140 and tobacco duty in clause 142. It deals with anti-avoidance issues, as has been discussed, in part 10, with the new general anti-abuse rule penalty clause in clause 146 and escalating sanctions in clause 147. It also promotes economic dynamism, with taxes on income and dividend income—it raises the personal allowance in part 1—and the new dividend income nil rate in clause 5 and schedule 1.
It goes on. The Bill introduces in clause 25 welcome improvements and flexibility both to the averaging of profits in the tax treatment of farmers, extending it from two years to five years, and for creative artists. Farmers have long been central to rural life in and around Macclesfield, and in many other constituencies across the country, and creative artists are increasingly adding to our economic and cultural mix in Macclesfield, as demonstrated by the upcoming Barnaby festival—details are available on its website. I hope that the new tax relief for the production of orchestral concerts in clause 50 and schedule 8 will add to that mix.
The Bill is radical in reforming enterprise taxes, as has been said, with cuts to, and relief from, capital gains tax in clauses 72 and 76, and the cutting of corporation tax to just 17% in 2020 under clause 42. These measures show that Britain is open for business, and are for the benefit of the young and enterprising entrepreneurs whom we need for the next generation of business leaders. That economic dynamism is needed for the long-term projects that the Government are rolling out, and it will benefit our children and grandchildren throughout their working lives.
Young people understand—and young people certainly understand this far better than old Labour Front Benchers—that supporting an enterprise economy is not a selfish, atomistic pursuit but a recognition that we all advance by pooling more effectively our comparative advantages into a common, more productive economy. According to research by UK Trade & Investment and the Economist Intelligence Unit which was published only 15 months ago, “running my own business” is the No. 1 career aspiration for the year 2020 among young people in the UK.
Having listened to debates on the Budget in the House and elsewhere, I think that it is important that we remind ourselves why young people are champions of the common value and common purpose that enterprise provides and why it is important that the Bill responds to that. That is key to explaining why the Bill is important for building on the foundations of this Government’s economic success with enabling measures for the success of future generations.
All business transactions must involve at least two parties: the supplier and the consumer. The very word, “enterprise”, is derived from joint undertakings that have been prised—extracted—from “inter”, or working for mutual advantage. It is a profound force for good. It is also voluntary, so carries the element not only of opportunity but of suitably managed risk. For risk to be suitably managed, suppliers need to be flexible. They need to be responsive to demand to survive and thrive in competitive markets. The Government need to ensure that the freedom to be flexible and the confidence to be bold exist for enterprise to thrive. The Government need to remove barriers and provide a stable and enabling environment for entrepreneurs. They are doing so in clause 42 by reducing corporation tax and by incentivising capital gains through clause 72 so that investment improves. As I said in my intervention on the shadow Minister, the Federation of Small Businesses clearly welcomes this.
The Government need to ensure that we have decent standards of education and skills training, hence the importance of the enterprise levy in part 6. The Government need to clear barriers to growth, whether those are unnecessary regulation and high and complicated taxes, or poor infrastructure for transport and communications. These are sometimes known as horizontal measures as they stretch across the whole economy and across large sectors, and do not apply only to a few selected winners within those sectors picked by Ministers and mandarins. This Government have been right to facilitate joint working between Whitehall and local authorities and business on the ground through growth deals and city deals and by encouraging local enterprise partnerships. That is profoundly long-termist.
The hon. Gentleman highlights the importance of skills and apprenticeships. Does he share my concern that apprenticeships, in the way in which they are delivered, still adopt the gender segregation of the past? Most of those going on engineering apprenticeships are boys and men, and most of those going on childcare apprenticeships are young women. Would it not be a good idea to ensure that those in receipt of the apprenticeship levy should demonstrate that they have made every effort to undo the job segregation that exists in our workplaces and in apprenticeships?
The right hon. Lady makes an important point. We want to tackle such segregation. In Macclesfield, AstraZeneca, a great pharmaceutical company that employs many engineers, has 30 new apprentices who started last summer. Many of them are women. That is exactly the route that we need to take. With the new levy, businesses will hopefully have a greater say in how apprenticeships should be taken forward, their quality improved and the gender mix enhanced. That was a good intervention.
The hon. Members for Bassetlaw (John Mann) and for Kirkcaldy and Cowdenbeath (Roger Mullin) spoke about productivity. Clearly, productivity rates are too low. As we heard in the Budget, the OBR believes that the long-term challenges are even worse than it had originally thought. The Red Book shows that the IMF and the OECD point to productivity challenges in many other countries, as well as the UK. I am pleased to see that the Government are tackling that head-on. Hon. Members can take a careful look at page 61 of the Red Book and see the vast array of initiatives that are being taken forward to address the productivity challenge. Those reforms rely on encouraging and enabling local enterprise all over the country.
The present Chancellor is the first Chancellor I can think of who has looked at the powers of the Treasury and actively sought to devolve them—to transfer those powers. That is progressive and it is the right way to secure long-term economic progress. Opposition Members should welcome that, like their colleagues in local government in cities close to me, such as Liverpool and Manchester.
That all adds to the Government’s commitment to forge local strategic partnerships which are needed for the success of other productive sectors such as life sciences, not least in the cluster known as the life sciences corridor in east Cheshire, a sub-region of the country which has productivity rates 14% higher than the UK average and higher than in the sub-regions of Bristol or Edinburgh. We in east Cheshire cannot be alone in enjoying high rates of productivity, so I welcome again the tax measures in clauses 72 and 42 that reduce the barriers of capital gains tax and corporation tax and see the Government encouraging business across the UK, including in the highly productive fields of advanced manufacturing and innovation. We see that clearly in the work that AstraZeneca is doing on Zoladex and other treatments not just in Macclesfield, but across the country. Other businesses should follow suit. It is vital for our economic growth.
In conclusion, the Bill delivers concrete measures that will enable a more enterprising economy. It is a Bill for the long term that makes us more flexible in dealing with short-term shocks and impacts, and it is a Bill for rebalancing the economy and for promoting productivity, which is a vital challenge. That is why I will be proud to support it in the Division Lobby later this evening.
I have no doubt that the support of the hon. Member for Macclesfield (David Rutley) for greater productivity and skills is heartfelt, but sadly, as my hon. Friend the Member for Feltham and Heston (Seema Malhotra) has outlined, this Finance Bill falls far short of meeting the needs of people on low or even average incomes in this country and helping them to do better for themselves and their families.
It is interesting that the Second Reading of the Finance Bill, which should be the centrepiece of today’s discussions, has been knocked off track somewhat by the disclosures in the Panama papers. Given that we have a major Finance Bill before the House, it is absolutely right that we consider whether it really addresses the central issue of fair taxation and how it can clamp down on tax avoidance and evasion.
Recent events have exposed parallel worlds. In the world of most of Britain’s 29.7 million taxpayers, taxes are deducted automatically. January was the month when 10 million everyday citizens submitted their tax returns. The first week of April is when most of the 22.7 million people who save in an ISA were looking at how they could top it up. That is the world of most of our citizens, the people who work, pay their taxes and follow the rules. They meet the deadlines. They are the people who put into the system and occasionally need to take out of it.
However, there is another world, a shadow world occupied by a group of people, small in number but big in influence, who share another set of characteristics. These are the people who play by a different set of rules. They are wealthy but, not satisfied with just being wealthy, they also want to be tax-free. Being rich is not rich enough. They live across borders, have homes in several countries and bank accounts in others, with businesses nominally located in low or no-tax regimes. That is not because they are busy or simply because they are successful. There is one overriding purpose: to maximise the income sheltered and obscured from tax authorities.
Tax avoidance is not illegal, but the Prime Minister himself has criticised aggressive tax avoidance schemes that subvert the intention of domestic tax laws. To muddy the waters over the past few days, some have suggested that ISAs and helping one’s children are forms of tax avoidance. They are not. To my mind, avoidance is when someone deliberately does something that Parliament never intended. Governments have legislated against particular means of avoidance, attempting to close a specific loophole each time. That kind of patchwork policy making has been described as like plugging holes in a colander, or playing whack-a-mole. The point is that, given the complexity of our tax system, tackling tax avoidance measure by measure is very hard to get right.
The disclosure of tax avoidance schemes regulations introduced by the previous Labour Government in 2004 were key to helping HMRC uncover new information about tax avoidance practices and getting hold of that information earlier. As a result, HMRC learned about schemes that it had never heard of, or ever imagined, and then it could act quickly to shut them down. Those were the first steps in a campaign for transparency. The coalition Government’s co-operation with the OECD’s base erosion and profit shifting measures was to be welcomed, as was their introduction of accelerated payment notices, which I believe have successfully recovered more than £2 billion in unpaid taxes.
This Bill includes a range of measures, including an updated general anti-avoidance rule, the publication of statements of tax strategy and tax planning, and a new asset-based penalty system for large-scale tax evasion, but it is as yet unclear what effect, if any, each measure will have. Even the most intense challenge to tax avoidance by the Government must compete with the ingenuity of legal and accounting experts that the very wealthy and the corporate giants have access to, and the global nature of their enterprises. That is why I want Parliament to tackle one of the strongest weapons in the tax avoider’s armoury: secrecy. If there is one thing that the Panama papers have shown us, it is the urgent need for more transparency.
It is tempting to focus on MPs’ tax returns this week—for the record, my taxable income for 2014-15 was £58,724, on which I paid £12,965.80 in tax—but the income of the largest multinational in one week is more than the combined annual incomes of every Member of Parliament. That is not surprising, and some may say thank goodness, but I want to make sure that, in the midst of all the comments about tax, we do not let multinational companies off the hook.
When Google agreed to pay HMRC £130 million in back taxes, the Chancellor claimed victory. My cross-party colleagues on the Public Accounts Committee and I questioned Google and HMRC. Yet even after a long session, not only was Google’s Europe, middle east and Africa president, Matt Brittin, unclear about his salary, but we remained unclear whether the £130 million represented a good deal. On top of that, I discovered that the Government’s diverted profits tax—the so-called Google tax—does not in fact apply to Google. It is still not certain what revenue the Government hope to gain from this measure. Even if Government estimates of £360 million a year are forthcoming, that is but a drop in the ocean when one begins to look at the operation of these enterprises.
I therefore decided to introduce a ten-minute rule Bill —the Multinational Enterprises (Financial Transparency) Bill. Its purpose is to require large multinational enterprises, which, as of January this year, must provide HMRC with their country-by-country reporting information, to include the same information in their annual returns to Companies House.
Does my right hon. Friend agree that it is not only taxpayers who lose out when multinationals do not pay their fair share of tax? The other big losers are small businesses, which have to pay tax. This is therefore not a level playing field, because they pay taxes while some of these big multinationals get away with paying nothing or very little.
My hon. Friend, who should be right honourable, is absolutely right. This proposal is a pro-business measure, because many small and medium-sized enterprises in the UK and around the world have no place to hide when it comes to where they pay their tax and how much tax they pay. Putting information in the public domain would help.
In March, I wrote to the Chancellor about my Bill, urging the Government to support it or to include measures in the Finance Bill. After all, the Chancellor himself told a meeting of European Finance Ministers that he was in favour of public country-by-country reporting, and he tweeted about it afterwards—so I suppose it must be happening. I have not had a reply yet, but I wait in anticipation.
One Treasury Minister—I am not sure whether it was the Exchequer Secretary, who is on the Front Bench today—has since suggested that we could not possibly take such a step unilaterally, for fear that we would be disadvantaged by comparison with our European colleagues. Well, I say that it is time we stepped up. The British people are sick of hearing story after story about big businesses not paying their taxes. To be honest, in the digital age of today and the future, privacy of the kind that these companies have enjoyed will not last. We need Governments who lead on public transparency, instead of relying on exposures caused by whistleblowing or technical mishaps.
To those who argue that greater transparency would disadvantage us internationally, I simply suggest that they look at the settlements that France and Italy are pursuing with Google. Both Governments look set to recover a greater sum in unpaid taxes than we were able to, despite their having a much smaller share of Google’s business than we do.
I also challenge the argument that public country-by-country reporting would damage businesses. The information I propose should be placed in the public domain is information that businesses are required to give HMRC—it is not commercially sensitive. Publication is a straightforward way to persuade companies not only to come clean and to explain their tax planning, but to restore their tarnished reputations. I believe it would deter them from using tax havens and shell companies.
Publication would also send a strong signal to developing countries, which are often short-changed by corporates that have huge undertakings in those countries but that pay little or no tax to support their developing economies. Charities say that developing countries lose more potential revenue each year because of corporate tax dodging than the amount given annually in overseas aid by all richer countries. They calculate that developing countries’ revenue losses are two to five times higher than those of developed countries such as the UK. This simple measure could profoundly help developing countries to prosper and be more self-sufficient.
Aid is vital for poorer nations, but just as important as a hand down is a hand up, and that will not happen unless we force these companies to come clean. As Christian Aid has illustrated, the Democratic Republic of the Congo was deprived of $1.35 billion—twice its health and education budgets combined—owing to the sale of mining contracts to five anonymous Virgin Islands companies. How can a country such as the DRC ever be self-sustaining if it is deprived of vital corporate taxes in that way?
Debate interrupted (Standing Order No. 9(3)).