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Session 2008 - 09 Publications on the internet General Committee Debates Finance Bill |
Finance Bill |
The Committee consisted of the following Members:Liam Laurence Smyth,
Committee Clerk † attended
the Committee Public Bill CommitteeThursday 21 May 2009(Morning)[Sir Nicholas Winterton in the Chair]Finance Bill(Except clauses 7, 8, 9, 11, 14, 16, 20 and 92)9
am
The
Chairman: I welcome all Members to the Committee on this
somewhat dull Thursday, after a fairly traumatic and difficult week for
the House. The Speaker has appointed me as an additional
Chairman—[Hon. Members: “Hear,
hear!”] I am grateful to be able to help out in the unavoidable
absence of both Mr. Hood and Mr. Atkinson, but I
am happy to tell you that Mr. Atkinson will be back in the
Chair this afternoon, so you will have to suffer me for only one hour
and 25 minutes.
I remind
Members that amendments may be tabled during the recess. Any amendments
received in the Public Bill Office before 4.30 pm on Thursday 28 May
will appear in print on Friday 29 May and will be unstarred and
eligible for selection by the time the Committee resumes on Tuesday 2
June, after the brief Whitsun recess. I remind the Committee that when
you adjourned earlier this week on Tuesday, you were, and therefore
still are, debating clause 6. I think that the hon. Member for
Hammersmith and Fulham had just completed what he had to
say—
The
Lord Commissioner of Her Majesty's Treasury (Mr. Bob
Blizzard): The hon. Member for Taunton had also completed
his
comments.
The
Chairman: It is a great pleasure to hear the hon.
Gentleman speak—one that I have had many times in the past, and
I suspect that in the next hour and 25 minutes he might gift
me again with his eloquence. Both the Conservative and Liberal Democrat
Opposition Front Benchers have
spoken. Mr.
David Gauke (South-West Hertfordshire) (Con): On a point
of order, Sir Nicholas, I think that I speak on behalf of the whole
Committee when I say what a great pleasure it is to have you here
today. Would it be possible for you also to chair the final sitting of
the Committee, as you did so well last
year?
The
Chairman: I am most grateful—as
we come up to the selection of Speaker, such comments are welcome
indeed. Unfortunately, the matter does not rest with me. I am merely a
temporary and additional Chairman for this sitting. If there are
further problems and I am asked to chair the Committee again, I shall
readily accept. I am grateful to the Government Whip for bringing me
entirely up to date, because I am clearly at a disadvantage, the
Committee having sat twice already.
Clause 6Additional
rate, dividend additional rate, trust rates and pension tax
rates Question
(19 May) again proposed, That the clause stand part
of the
Bill. John
Howell (Henley) (Con): Allow me to add my congratulations
on your appointment as our additional Chairman, Sir Nicholas.
Unfortunately, not having been here on Tuesday, you missed the
magisterial way in which my hon. Friend the Member for Hammersmith and
Fulham explained the whole of clause 6 in great detail, including a
large measure of the economic thinking behind it. You missed the
delights of Laffer curves and the precision of the calculations of tax
rates and their impact on
people. Having
reflected since Tuesday’s sitting, I think that, inevitably, it
all comes back to the adequacy and quality of the modelling used to
underpin the assumptions within the 50 per cent. tax rate. The adequacy
of the modelling is a topical subject. The Government will be aware of
the wish of the TaxPayers Alliance for more dynamic modelling. I have
some problems with that not being comprehensive enough; nevertheless it
shows that the idea of modelling is very much on the table. That was
recognised by the Institute for Fiscal Studies. One of the other things
that seemed obligatory on Tuesday was quoting the IFS, and I have one
such quote today. I must put down my glasses because, in my efforts to
be frugal these days, I print things with two sides on the same page,
so as not to increase expenses. The Committee will therefore have to
excuse me if I peer somewhat as I read. The IFS says that, in its
initial reaction to the Budget, it seems that the Treasury
has
“not accounted
for consumer spending falling as a result of this change. If these
effects are taken into account, the Government could lose up to
£1.5 billion in indirect tax revenues, even if the Treasury is
right”. There
is a lot of concern about the underlying modelling that took place to
justify the 50 per cent. tax rate—if, indeed, it was done to
justify it. Given that it goes to the credibility of the tax system, it
is important that it is based not only on political will in the United
Kingdom but on
analysis. Matters
are made even worse by the abandonment and the absence of the fiscal
rules. I did not believe in them very much and nor, it seems, did the
Chancellor or the Prime Minister before him; nevertheless, they were at
least useful in pointing to a direction in which the Government would
go. I
shall not go through the issues that we spoke about on Tuesday in
detail, but it is important to understand where the tipping point is in
each of the Laffer curves, depending on the range of behaviours. We
heard my hon. Friend the Member for Hammersmith and Fulham talk about
data on average taxpayers being used to inform decisions about
specialist groups, which again goes to the heart of the credibility of
the underlying modelling that took
place. The
Institute of Chartered Accountants expressed concern about such matters
in its pre-Budget submission to the Government and in its post-Budget
assessment, in which it called for a detailed economic analysis to be
undertaken. It used the same words in its pre-Budget
statement, and the fact that it used the same words suggests strongly
that it is not happy with the economic analysis done.
We heard
about the confusion in the Treasury Committee about the adequacy of the
modelling for the 50 per cent. tax rate. My hon. Friend the Member for
Northampton, South, who is not here today, quoted question 335 from the
proceedings of that Committee. The Chancellor was talking about the
£150,000 limit and the 50 per cent. tax rate and
said: “There
is no science behind it, it is just simply my judgment that I thought
that figure was an appropriate figure. It is the top 1%, as it happens,
of earners in this country and I decided that that was the right
level”. Again,
there is some
confusion.
Mr.
Gauke: Does my hon. Friend infer from that quotation that
the figure of 50p was perhaps selected on political rather than
economic grounds?
John
Howell: That is a pertinent remark, and it is a pertinent
conclusion to draw. In the morning sitting of the Treasury Committee,
Mr. Williams, who is the director of personal tax and
welfare reform at the Treasury, said that some modelling had taken
place. There is therefore confusion about whether the modelling was
scientific. Was the Chancellor criticising the modelling that had taken
place, which he would have been aware had been described in a little
detail in the earlier sitting? Did that modelling take place before he
reached his decision on a 50 per cent. tax rate? Was that modelling to
justify a decision that had already been taken, or was it modelling
that was used to inform a decision before it was taken? We simply do
not know the answer to that.
I should also
like the Minister, in summing up, to comment on the points raised both
by the IFS and the Institute of Chartered Accountants. The Committee
would benefit from a much better explanation—perhaps an
explanatory memorandum on
modelling. Mr.
Mark Todd (South Derbyshire) (Lab): I listened with care
to the hon. Gentleman, who clearly has concerns about the clause. Maybe
he is going to depart from the fence on which his Front-Bench team has
sat so far and call a vote on it. Would he like to tell us more about
his practical thinking on this day, on this
matter? John
Howell: I thank the hon. Gentleman for exposing the bear
trap in front of me with such clarity. [Laughter.] I will not
take insults, Sir Nicholas. Perhaps he feels that because I have not
been here as long as other Members sitting here today I am going to
walk straight into it. I am politically astute enough to realise that
the bear trap is there and tiptoe around it, which is precisely what I
am going to do. I am not going to depart at all from the comments that
have been made by my hon. Friends on the Front
Bench. Mr.
Peter Bone (Wellingborough) (Con): I will almost jump into
the bear trap because, let us face it, our party has made it quite
clear that it is the wrong measure and is against the interests of the
nation. Does my hon. Friend agree with me that, because of the fine
mess the Government have got us into, we cannot make any promises until
we see what the books are like?
John
Howell: My hon. Friend is completely right. It really is
quite outrageous to expect us to make those sorts of
promises.
John
Howell: Him or me? We need a change of Government before
there is any possibility of me becoming a Minister, and I look forward
to it. Go on, I will give way now—I have forgotten where I was.
[Laughter.]
Mr.
Todd: It would be helpful if the hon. Gentleman described
what this bear trap is. If it is a matter of principle and this is the
wrong policy for the country, then surely his party should vote against
it—as indeed should the party of the hon. Member for Taunton,
who likewise declined to tell us how he intended to vote on the matter.
If it is the case that the measure will not actually raise any money,
then surely the point raised by the hon. Member for Wellingborough is
irrelevant. It is not going to make the circumstance of our economy any
better or worse, so his argument appears confused at the very
least.
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