PARLIAMENTARY DEBATES HOUSE OF COMMONS OFFICIAL REPORT GENERAL COMMITTEES Public Bill Committee FINANCE BILL (Except clauses 1, 3, 16, 183, 184 and 200 to 212, schedules 3 and 41 and certain new clauses and new schedules) Fifth Sitting Thursday 16 May 2013 (Morning) CONTENTS Written evidence reported to the House. CLAUSES 6 and 7 agreed to. SCHEDULE 1 agreed to. Adjourned till this day at Two o’clock. PUBLISHED BY AUTHORITY OF THE HOUSE OF COMMONS LONDON – THE STATIONERY OFFICE LIMITED £5·00 PBC (Bill 001) 2013 - 2014 Members who wish to have copies of the Official Report of Proceedings in General Committees sent to them are requested to give notice to that effect at the Vote Office. No proofs can be supplied. Corrigenda slips may be published with Bound Volume editions. Corrigenda that Members suggest should be clearly marked in a copy of the report—not telephoned—and must be received in the Editor’s Room, House of Commons, not later than Monday 20 May 2013 STRICT ADHERENCE TO THIS ARRANGEMENT WILL GREATLY FACILITATE THE PROMPT PUBLICATION OF THE BOUND VOLUMES OF PROCEEDINGS IN GENERAL COMMITTEES © Parliamentary Copyright House of Commons 2013 This publication may be reproduced under the terms of the Open Parliament licence, which is published at www.parliament.uk/site-information/copyright/. 123 Public Bill Committee16 MAY 2013 Finance Bill 124 The Committee consisted of the following Members: Chairs: †MR DAVID AMESS,MR DAVID CRAUSBY † Ashworth, Jonathan (Leicester South) (Lab) † Mearns, Ian (Gateshead) (Lab) † Baker, Steve (Wycombe) (Con) † Menzies, Mark (Fylde) (Con) † Cryer, John (Leyton and Wanstead) (Lab) † Mills, Nigel (Amber Valley) (Con) † Doughty, Stephen (Cardiff South and Penarth) (Lab/ †Mowat,David(Warrington South) (Con) Co-op) Murray, Sheryll (South East Cornwall) (Con) Duddridge, James (Rochford and Southend East) † Nash, Pamela (Airdrie and Shotts) (Lab) (Con) † Newmark, Mr Brooks (Braintree) (Con) † Evans, Chris (Islwyn) (Lab/Co-op) O’Donnell, Fiona (East Lothian) (Lab) Gauke, Mr David (Exchequer Secretary to the † Offord, Dr Matthew (Hendon) (Con) Treasury) † Pearce, Teresa (Erith and Thamesmead) (Lab) † Gilmore, Sheila (Edinburgh East) (Lab) † Pugh, John (Southport) (LD) † Gummer, Ben (Ipswich) (Con) † Qureshi, Yasmin (Bolton South East) (Lab) † Hands, Greg (Chelsea and Fulham) (Con) Shannon, Jim (Strangford) (DUP) † Jamieson, Cathy (Kilmarnock and Loudoun) (Lab/ † Stephenson, Andrew (Pendle) (Con) Co-op) † Stewart, Rory (Penrith and The Border) (Con) † Javid, Sajid (Economic Secretary to the Treasury) † Thornton, Mike (Eastleigh) (LD) † Jones, Mr Marcus (Nuneaton) (Con) † Uppal, Paul (Wolverhampton South West) (Con) † Kwarteng, Kwasi (Spelthorne) (Con) † Williams, Stephen (Bristol West) (LD) † Leslie, Chris (Nottingham East) (Lab/Co-op) † McKinnell, Catherine (Newcastle upon Tyne North) Simon Patrick, Committee Clerk (Lab) † McDonald, Andy (Middlesbrough) (Lab) † attended the Committee 125 Public Bill CommitteeHOUSE OF COMMONS Finance Bill 126 clearly a good case to be made for some of that strategy. Public Bill Committee However, we now feel very strongly that we require evidence for the Government’s continuing changes, Thursday 16 May 2013 particularly relating to 2015, which is the subject of the clause. The clause will put corporation tax at 20% of company profits, other than ring-fenced profits, which (Morning) are, of course, addressed elsewhere in the Bill. Obviously, there is some sort of relationship with [MR DAVID AMESS in the Chair] levels of personal taxation and income tax. After all, it is sometimes said that corporation tax could almost be Finance Bill regarded as deferred income tax, because corporations are ultimately owned by individual shareholders, who, at some level, pay tax on any income that comes (Except clauses 1, 3, 16, 183, 184 and 200 to 212, downstream from corporate profits. The Economic schedules 3 and 41 and certain new clauses and new Secretary may wish to elaborate on the argument that schedules) there is a point of alignment here with the 20% rate. Has a strategic choice been made on rates of income Written evidence to be reported tax? Last time we sat, the Committee debated alignments to the House with the small profits rates of smaller firms, but did FB 02 BVRLA income tax go through the Treasury’s mind when it was thinking about these points? FB 03 James George Jatras, Esq FB 04 Law Society of England and Wales I do not think that the Treasury has ever produced a firm analysis of how further cuts to corporation tax 11.30 am would definitely feed through into economic growth. There has been all sorts of conjecture, speculation and The Chair: The room is relatively warm, so Members anecdotal examples from various hon. Members, but may, within reason, remove articles of clothing to be we need to see hard evidence to be certain that such comfortable throughout our proceedings. instincts are correct. I want to press the Minister on whether further falls in corporation tax will undoubtedly Clause 6 feed through into positive economic activity or whether, as some suspect, corporate surpluses will be stockpiled MAIN RATE FOR FINANCIAL YEAR 2015 if the tax strategy is not correct? Question proposed, That the clause stand part of the I want to ask the Minister about his understanding of Bill. inward investment and outflows of investment from the UK relative to other jurisdictions. The corporation tax Chris Leslie (Nottingham East) (Lab/Co-op): Good rates set for 2015 will not exist in isolation; other morning, Mr Amess. It is a pleasure to serve under your national jurisdictions set their own. Labour tax practitioners chairmanship. I cannot think of anywhere I would are anxious that if we are not careful, the UK will get rather be than here on the Finance Public Bill Committee. into a vicious circle of a constant chase for lower rates, All hon. Members are ready and raring to go, although in which countries engage in an arbitrage process of I am not sure we should remove all items of clothing for always outbidding one other, with the result that public comfort. I am sure we gentlemen should continue to services and public investment lose out. wear our neck ties. You would not want the Committee to go all Conservative modernist, Mr Amess. I wonder It may well be that the United Kingdom finds itself in whether you remember the good old days, when the a more tax competitive position than other jurisdictions, Conservatives were in the centre ground. The hon. but that is not necessarily guaranteed because they are Member for Grantham and Stamford (Nick Boles) was perfectly able to reciprocate by following suit or even the main exponent of the open-neck look. How long outbidding the United Kingdom, as we have seen in ago those days seem now that the Conservatives have some jurisdictions over the past decade or two. Any firmly moved back to the right of the political spectrum. observer of international tax rates would say that those Anyway, I digress. [Interruption.] Well, one has to have rates have tended to flow downwards across the main a go at such things. developed jurisdictions. Has the Minister taken stock of where that flow will end? Will the main developed The clause takes us back a little to before the Committee nations settle on an equilibrium as a natural level of adjourned, when we were debating the clauses relating corporation tax, or will that circle be pursued in perpetuity, to corporation tax changes. The Exchequer Secretary is which would obviously affect the Treasury’s strategy? not with us today, but he led that debate opposite my hon. Friend the Member for Kilmarnock and Loudoun Famously, the Republic of Ireland has a corporation last time the Committee sat. I will ask the Economic tax level that is relatively low compared with those of Secretary a few questions to test his knowledge of the other countries. It has been under pressure, particularly Treasury’s corporation tax strategy. I am not sure who from Germany and other member states of the European is in charge of such things, but I am sure he has a strong Union, under the rescue programme for countries in the grasp of the matter. eurozone that require financial assistance. There was We hope that reducing corporation tax will have speculation about Germany or other nations putting an economic benefit. After all, the previous Labour pressure on Ireland to move its corporation tax strategy Administration reduced corporation tax and there is in an alternative direction. It is obviously unusual for a 127 Public Bill Committee16 MAY 2013 Finance Bill 128 nation state that has a particular tax strategy to come of these issues a little in the debate on clause 4, but we under external pressure from its partners and other did not get to the bottom of the issue of the other tax nations. that interplays with corporation tax. As part of the Thankfully, we stayed out of the euro, as a result of Government’s strategy, they have introduced a levy on decisions taken by Labour—[Laughter.] We will see the banks, at a puny, knock-down rate. They said that it where the Chief Secretary to the Treasury—the Minister’s was supposed to yield £2.5 billion annually, but it has good colleague—takes the Treasury, because he spent totally failed to bring in the sums that the Prime Minister 10 years of his life campaigning for membership of the promised that it would. In fact, last year it brought in euro, but I do not want to digress again. We need to only £1.6 billion, which represents a pretty big shortfall. know what evidence the Treasury has that the strategy Think what that extra £900 million could have done for a cut in corporation tax in 2015 will yield positive for public services and investment if they had hit that economic benefits, rather than essentially being lost by £2.5 billion target.