The Queen's Speech has been approved by Parliament after some detailed and impassioned debates, which often touched on tax.
MPs have voted to approve the Queen’s Speech by 323 to 309 votes. The DUP’s 10 MPs had agreed to support the minority Conservative government as part of a deal with the Tories (see above). Labour's amendment was defeated by 323 to 297. It regretted that the Speech failed to end austerity, argued that ‘those who are richest and large corporations, those with the broadest shoulders, should pay more tax, while more is done to clamp down on tax avoidance and evasion’ and called for Brexit to deliver the ‘exact same benefits’ as membership of the EU single market and customs union.
An amendment aimed to preserving the UK's EU single market and customs union membership, promoted by a cross-party group of MPs, led by Labour’s Chuka Umunna, was unsuccessful. Three Labour shadow ministers were sacked (and a further one pre-emptively resigned) for supporting this amendment.
A number of other amendments were tabled but not selected for debate. These included separate amendments from the SNP and Scottish Labour each calling on the government to extend the exemption from VAT to Police Scotland and Scottish Fire and Rescue. A Plaid Cymru amendment argued that ‘measures should be brought forward to ensure taxes paid in Wales are retained by the Welsh Government, including Corporation Tax and VAT’.
A full list of the proposed amendments can be seen here.
If any amendments had passed, this could have led to the Government falling.
Chancellor of the Exchequer Philip Hammond accused Labour of embarking on a massive expansion of borrowing and subjecting the country to a catastrophic programme of ideologically driven, productivity-sapping, investment-destroying nationalisation on a scale that the country has not seen since the 1970s. He said that the Tories cut corporation tax to the lowest rate of any large developed economy and two things happened: the private sector created 3.4 million new jobs and it raised an additional £18 billion in corporation tax. Hammond cited the IFS which said Labour may face a £8.6 billion a year shortfall in taxation relative to their expectations. He declined to say whether he agreed with comments attributed to Sir Oliver Letwin that some tax rises will be needed in this Parliament to maintain the quality of public services.
Robert Jenrick supported the Chancellor by stating that Government have passed more than 50 measures on tax avoidance and evasion, taken the anti-base erosion and profit shifting process forward, published one of the world’s first public registers of beneficial ownership and reduced the tax gap to the lowest level in living memory. Dame Caroline Spelman said, with the digitisation of the economy and we will need to demonstrate that technological progress can support rising living standards for all. Iain Stewart suggested Tory measures to tackle tax avoidance could ‘choke’ entrepreneurial spirit. Stephen Hammond questioned whether it is acceptable for interest payments on student loans to be 6.1% when the market rate is something less than one per cent. A solution is to allow new entrants into the student loan market. Jo Churchill said it is often the case that the more a business raises wages, the lower its profit margin and, therefore, the lower its corporation tax return. Julian Knight said the Tories need to tell young people that the party will deliver a fairer balance of taxation between the generations.
Dover MP Charlie Elphicke said HMRC and the Government must be ready on ‘day one’ after Brexit, especially on customs. He is also worried that a ‘massive’ increase in public sector debt will cause interest rates to rise. It is an affront when a cleaner pays more in tax than the big business whose offices she cleans, he said. Nicky Morgan said all MPs want to hear more about proposed transitional arrangements for Brexit. Robert Neill was ‘tempted’ by Chuka Umunna’s Brexit rethink amendment but does not think it works in practical terms.
Secretary of State for Business, Energy and Industrial Strategy Greg Clark said any economist will tell you that all taxes on companies have to be paid by workers, by consumers and by pensioners, through lower wages, higher prices and less valuable investments meaning lower pensions.
Sir Edward Leigh said the Tories’ unsuccessful bid to increase its majority at the general election was down to being almost too honest in explaining the level of the national debt’ “We have heard many calls for more public spending, but it all comes from hard-pressed taxpayers. I make no apology for reminding the House that the national debt stands at £1.7 trillion”. On social care, he added: “There is a limit on how much we can pay from generation taxation when the top one per cent pay for 25 per cent of all spending, so let us be honest in these debates.” Jeremy Lefroy said we must have potentially ‘slightly higher taxes’. He said: “The Liberal Democrats were at least honest in their manifesto, saying that we would have to raise taxes to pay for increased investment in health.”
In his maiden speech, Bim Afolami said: “The world-class human capital produced by our education system needs to be combined with financial capital investment, with better infrastructure and with a more competitive, simpler tax system for individuals and businesses. That is what a 21st-century, new economy looks like.” Huw Merriman welcomes the £2 billion that the Government put in earlier this year for social care, ‘but that remains unfunded, due to the failure to get the tax system to pay that extra amount’. The MP added that those who can afford it to take some form of individual responsibility for social care payments themselves, otherwise we will effectively see the taxpayer subordinated to those who end up inheriting under the system’’. Alex Burghart, a teacher of medieval history, warned the House that his constituents’ attitude to taxation has changed very little since the peasants’ revolt of 1381.
Shadow Chancellor John McDonnell said corporation tax, capital gains tax, inheritance tax and the bank levy have all been ‘slashed’ since 2010 and will have cost taxpayers more than £70 billion between last year and the end of this Parliament. Corporations are now sitting on more than £580 billion of earned income that they are not investing, he added. The richest one per cent of people in the UK now own almost one quarter of the country’s wealth. The CGT cut is going to the 60,000 wealthiest families in this country, he said. We have witnessed the longest fall in wages on record. Nearly six million people earn less than the living wage. He said last year saw the slowest rate of business investment since 2009. Labour would increase expenditure by £48.6 billion by a range of revenue sources, all of which are identified and advised on. McDonnell said the Chancellor was threatening to set up the UK as a tax haven post-Brexit before the election but now it is reported that he is potentially looking to the customs union, and a long and uncertain transitional period.
Ed Miliband said we have cuts in corporation tax still to come that will cost £5 billion over the next few years. If there is no magic money tree, is it really the priority that Apple, Starbucks and other companies should pay 17 per cent tax when ordinary families in Britain pay 20 per cent, he asked. As we cut taxes and hand money back to big multinationals, they are putting much more of it in the bank. That is why we must have a much more grown-up debate about who needs tax incentives and who does not, said Liam Byrne. He added that according to the House of Commons Library, all the tax cuts over the past few years have not stopped one million people leaving entrepreneurial activity. Shadow Business Secretary Rebecca Long Bailey said businesses need high-quality infrastructure, both physical and digital, but public investment has been ‘woeful’ under the Tories.
Chris Williamson drew attention to research by Professor Danny Dorling stating that Britain is the second most unequal country of the richest 25 nations on earth. Geraint Davies said the International Monetary Fund and the OECD say that there is a relationship between inequality and growth - ‘namely, the more inequality, the less growth’.
Chuka Umunna was behind an unsuccessful amendment pressing for the UK to remain within the Customs Union and Single Market. He said the Institute for Fiscal Studies has forecast that leaving the single market could cause a £31 billion hit to the public finances, making it all the more difficult to end years of austerity. “The single market is more than a free trade zone. It provides a framework of rules that protects people from the worst excesses of capitalism and unfettered globalisation.”
Chris Bryant said the UK is guilty of wanting Swedish levels of healthcare, but US levels of taxation to pay for it. “France spent $4,959 per head on healthcare in 2014; we spent only $3,935”, he said. Susan Elan Jones asked for an honest debate about taxation and cost-effectiveness, and about what we want to fund and how we propose to do it.
During debate on health, Stephen Hepburn complained that a drug called Orkambi for cystic fibrosis is not available on the NHS because of ‘cuts, cuts cuts’. He said we can get the money from the same ‘magic Tory Government money tree’ that gave the richest two per cent of estates in this country a tax cut. And we can get it from the same Tory Government magic money tree that gave the top five per cent of richest corporations in this country tax cuts. On social care, John Grogan said ‘we can either fund it individually or we can fund it collectively, perhaps by levying 10 per cent or 15 per cent on all estates’. Gill Furniss said nurses have been handed a one per cent pay cap for seven years in a row ‘while continuing to give tax breaks to the richest’.
No SNP amendments were selected and the party supported Chuka Umunna’s Brexit rethink amendment. The party’s economic spokesperson Kirsty Blackman criticised a lack of success by Tories on productivity: “In the time that a British worker makes £1, a German worker makes £1.35.” She said tax and benefit reforms can be ‘squarely’ blamed for the IFS saying child poverty would rise to 30 per cent by 2021-22. This government has consistently failed to support policies that recognise the problems that millennials face, she said. The Tories have already presided over a decade of wage stagnation, spiralling household debt, decreasing household debt, decreasing household savings and the drastic dismantling of the social security safety net.
Chris Stephens said 25 per cent of posts in the national minimum wage compliance unit are lying vacant. He later suggested it was inappropriate for HMRC to negotiate a contract during purdah for new regional centres. Hammond said he knew nothing about it. On learning this, Hannah Bardell asked Hammond to make a statement on the HMRC closures. Hammond promised to write to her and replied: “An issue arose during purdah which involved the risk of immediate financial loss to HMRC, and that under the purdah rules it was able to engage in a negotiation to try to prevent that loss to the public purse.”
Neil Gray said that it is ‘time that the Government finally ditched the need for the ‘disgusting’ rape clause by ditching the two-child rule for tax credits’. Joanna Cherry said the Scottish Government has increased police numbers. “We have been able to do that despite the UK Government’s repeated refusal to remove the burden of VAT from Police Scotland. Police Scotland is the only territorial police authority in the UK unable to recover VAT. They have recently rectified the anomaly for several other national bodies: it is now time to do it for Police Scotland.”
Lib Dem speakers
Sir Vince Cable said whatever growth we have is now sustained not by investment but by unsustainable forms of consumption, especially short-term credit. “If we are going to succeed as a country, we need long-term collaboration with business, and a proper framework of long-term stability and security, but that is badly missing from Government policy at present.” Sir Vince is newly reinstalled as the party’s Treasury spokesman but shortly expected to be elected unopposed as party leader.
When a Coalition minister, Norman Lamb asked HMRC to do an in-depth investigation into the care sector. It has now reported £2.5 million of underpaid wages in that sector. “We cannot continue to operate our public services on the backs of poverty wages for our lowest paid workers.”
Sammy Wilson defended the DUP-Conservative agreement, saying there is nothing ‘grubby’ about money put into the infrastructure of Northern Ireland to promote jobs, or money going into the health service in Northern Ireland or the education system.
The debate on economy and jobs can be read here.