The four day Budget debate continued in the early part of this week, ahead of the Chancellor’s announcement of a u-turn on national insurance. A summary of days three and four are below. A summary of the debates on day one and two can be found here.
Economic Secretary to the Treasury Simon Kirby said that when corporation tax was reduced from 28 per cent to 20 per cent, it resulted in a 28 per cent increase in tax revenues and in more jobs. On the productivity investment fund, he said it will address pinch points on the national road network and invest in the digital infrastructure. Foreign Secretary Boris Johnson claimed that the cut to corporation tax and the investment in infrastructure, skills, housing and technology will ‘not only building a platform for sustainable growth but create a launch pad for the most extraordinary exports’. Chief Secretary to the Treasury David Gauke defended the NI increase, saying MPs all have to recognise that the difference between the benefits received by the employed and the self-employed have narrowed but the gap in contributions has not, and this means that the employed pay a lot more for the same benefits.
Neil Parish said the Government has ‘rightly’ reduced corporation tax. Many small businesses and companies in his constituency and across the country are not, however, incorporated, “so trying to tax the self-employed more is not the right way forward”, he said. Sir Edward Leigh said there is no point simply attacking for Government for increasing National Insurance contributions without proposing how they are going to tax to have a world-beating healthcare system. Perhaps we should end the fiction that National Insurance contributions can pay for all social care, he said.” We should merge National Insurance and taxation, simplify things, and try to raise more money that way.” Helen Whately defended the National Insurance rise by stating that the’ tax system needs to respond’ to more people choosing to be self-employed or finding work in the gig economy and that more businesses are moving online.
A number of Conservative MPs advocated radical tax reform. Maggie Throup said this is the time not to tinker around the edges, but to make lasting reforms to the tax system that are fit for the changes that the Government is seeing in today’s employment environment in the gig economy and also to keep the UK at the forefront of the global market. Richard Drax said: “As a Conservative, I long to hear from a Conservative Chancellor a vision for this country that involves a massive reform of our tax system, which today is one of the most complicated in the world. For example, why cannot we have a flat-rate income tax of, say, 30 per cent? KISS—keep it simple, stupid—is what we were told in the Army, and I think that there is a lot of room for that in the tax system of this country.” He added that Making Tax Digital will lead to businesses requiring the services of an accountant more often and ‘there will be extra costs’. He wants the abolition of inheritance tax (which he says is immoral), a review of capital gains tax and the simplification of the whole tax system. He also said that tax avoidance is ‘something we all do for our families’ sake’.
Nigel Huddleston found it heartening to hear some ‘indication and recognition that perhaps taxes such as business rates have had their day — ones based on bricks and mortar, as opposed to clicks and order’. Huddlestone asked the Chancellor to look again at cases such as individual cinemas, which seem to have been unfairly hit by the changes in business rates. Chris Philp wants to see a significant increased registration tax for new diesel cars, to deter people from buying new diesel cars. There would no retrospective effect on existing diesel car owners, he said.
The NICs increases were the focus of many Labour MPs. Thangam Debbonaire said the 12,800 self-employed people who, on average, earn 40 per cent less than employees ‘now face having to pay more in taxes in an already uncertain economy’. Liz McInnes pointed out that the Federation of Small Businesses was scathing about the NI rise, saying that it ‘should be seen for what it is— a £1 billion tax hike on those who set themselves up in business’. If some lose their business, they are not even eligible for contributory jobseeker’s allowance. “So to increase the tax burden on them, without a commensurate increase in benefits, is simply unfair”, said Jonathan Reynolds, a Treasury spokesman. Iain Wright said the National Insurance contributions ‘debacle’ will result in a tax on enterprise, on ambition and on personal risk-taking by entrepreneurs. Jim Cunningham questioned why taxes are increasing while real wages are falling. Stephen Pound said his son, a self-employed electrician, is being ‘hammered’ for National Insurance contributions (as a result of Budget 2017) while being required do quarterly tax returns. Shabana Mahmood was disappointed that the Government failed to take action to offset the planned cuts to universal credit later in this Parliament. She said cuts to corporation tax in recent years have not had a good impact on wages and that ‘business investment is nowhere near where it should be’. Susan Elan Jones said that rather than the ‘extravagant change’ to inheritance tax and the cuts to corporation tax, the Government should have been on the side of the small businessperson and the self-employed.
Other Labour MPs raised the broader balance of tax cuts and increases. Shadow Chief Secretary to the Treasury Peter Dowd said the Government’s proposal to increase insurance premium tax from 10 per cent to 12 per cent is a regressive measure. He said the Government has ‘dusted-off’ policies of hard Brexiteers, who will ‘stop at nothing until Britain becomes a low-wage, low-tax, low-regulation economy’. Julie Cooper said it is ‘obscene’ that by 2022, cuts to the banking levy, capital gains tax, inheritance tax and corporation tax will have cost the taxpayer another £70 billion, when children who are unlucky enough to be the third child in a struggling family will suffer as the withdrawal of child tax credit ‘pushes another 600,000 children into poverty’. Alex Cunningham said that probate fees are set to rise from a flat rate charge of as little as £155 to a minimum of £300 and ‘as much as £20,000’, is a ‘nice little earner’ from the Tories’ very own and very real ‘death tax’. Dr Rosena Allin-Khan said the Treasury has chosen to make a series of tax cuts that will actually cost £41 billion a year by 2020 - more than the £37 billion saved from social security cuts. Melanie Onn said that ‘from tax credit cuts to the crisis in social care, it is women who have consistently been hit hardest by the Tories’ policies’.
Mike Gapes made a plea to his party. He said that if we had a credible Opposition, we would be able to challenge the Tories on ‘the NICs crisis’ and which party is perceived as low-tax, effectively and avoid diversions into other matters. Clive Lewis asked the Chancellor if he has made any allowance in his forecasts for future losses in tax revenue yielded by the taxes of EU citizens working in the UK, who may have to leave because of Brexit. Gavin Shuker said the OBR made a series of assumptions in its central forecast for the Budget, one of which is that there will be no changes to taxes levied through the EU. Dame Rosie Winterton cited Landman Economics which found that zero-hours contracts had created a £1.9 billion hole in the public finances. It says that the true costs are higher still, as those on zero-hours contracts are more likely to need to rely on in-work benefits such as tax credits and housing benefit.
From the SNP benches, George Kerevan suggested that Germany has a ‘lead’ in technical training because it ‘consistently has a much higher level of corporation tax in order to fund that’. He added that the Budget will raise the taxes of the self-employed and entrepreneurs, the people whose ‘motivation is required for growth in the economy and an increase in productivity’. Kirsty Blackman said this Government are taxing the aspirations of entrepreneurs. Blackman said the spring 2017 Budget 2017 has done absolutely nothing for the oil and gas industry beyond what was promised last year. Brendan O'Hara fears that the days of the Chancellor using Scotch whisky as a cash cow have ‘returned with a vengeance’. Alan Brown asked why HMRC does not tax ‘real luxury goods’ that only the wealthiest can afford and increase taxes that way, rather than Scotch whisky at 75 per cent. Brown added that the Government should be clamping down on tax avoidance rather than hard-working families; he was referring to tax credit debt collection which is predicted to bring in half a billion pounds in just over four years. He said: “We have £23.5 billion in giveaways with corporation tax, £2.8 billion with inheritance tax relief and £3.7 billion in lifetime ISA tax relief.”
Sarah Olney (Lib Dem) said including schools in the apprenticeship levy is utterly absurd. “The apprenticeship levy is supposed to raise money for training in employment. To levy it on schools, which are already providing excellent learning opportunities, is outrageous.” She agreed to work with Anna Soubry to investigate.
Jim Shannon (DUP) said given that small and medium-sized enterprises in Northern Ireland employ more people than large companies and the public sector combined, it is essential that the Government provides support rather than ‘further burdening’ a group who pay more than their share in tax.
Blog by Hamant Verma, External Relations Officer, CIOT