FINANCE (NO. 2) BILL
The Committee consisted of the following Members:
Simon Patrick, Committee Clerk
† attended the Committee
The Chair: I have a statement to make. I gather that in the last Division, hon. Members thought that they were voting on whether amendment 1 should be withdrawn—[Hon. Members: “Absolutely!”]—not whether it should be made. I thought so, too. I am advised that it is not procedurally possible to vote on withdrawing an amendment, so I apologise to the Committee. I was not aware that that was not the procedure; I did not think it strange at the time. If any hon. Member objects, the amendment is not withdrawn and the Committee needs to decide whether to make it. I therefore propose to put the Question on amendment 1 again.
Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op): On a point of order, Mr Amess. I appreciate that considerable efforts have been made to resolve this matter, but I think that it is important to have some clarity on the record and to understand the position. My understanding at the time of the vote was that we were indeed taking a view in Committee on whether the amendment would be withdrawn. I would then have anticipated that a proper vote would be taken.
I seek some clarity on this. I would be grateful for information from you in your role as Chair, Mr Amess, because if the vote was not constitutional per se and should not have been taken on that basis, does the vote stand? A subsequent decision was taken to approve the clause or to allow the clause to stand part of the Bill. Is that affected by any decision that is made at this point? Is it not the case that the Government would have the opportunity simply to amend the Bill at a later stage if it was their view that the decision taken by the Committee, however inadvertently, should not stand? I just seek some information from you, Mr Amess.
The Chair: I thank the hon. Lady for the points that she has made, which are entirely fair. Let me make it clear to the Committee again that I did think, mistakenly, that we were having the vote on the amendment being withdrawn. The Clerk has advised me that he knew what was happening, because he knew that we could not have a vote on the amendment being withdrawn, but obviously we cannot read one another’s minds. But as Chairman I am being honest with you —
Also, when it came to the next vote, I did not say “as amended”, which of course I should have done, according to some Members. I can only apologise to the Committee. Whether we were distracted by Divisions in the House, Prorogation or whatever was going on, I do not know, but I made a mistake. We all know the numbers on the Committee, so I say again that the most sensible thing to do would be to rerun the vote—as the hon. Lady has said. The record of this morning’s proceedings will stand, but as we go through the procedures now, obviously the record will show something slightly different.
Fiona O'Donnell (East Lothian) (Lab): Further to that point of order, Mr Amess. I understand that some Members are accusing me of being responsible for all the confusion, given an earlier intervention. I ask for guidance, Mr Amess. It has not been helpful that many Members were sitting here while discussions were taking place in private, and are not aware of what happened in those discussions. The Chair is fallible and makes mistakes. He is not able to read the mind of the Clerk—I absolutely appreciate that. A presumption has been made about what Members thought they were doing, but what happened, happened, and that is a matter of record. As someone who is new to this place, I would have thought that even if something happened unintentionally and mistakenly, it does not alter the fact that it happened. I am struggling to understand how we have got here.
Jonathan Ashworth (Leicester South) (Lab): Further to that point of order, Mr Amess. I appreciate the way in which you made your remarks a few moments ago. To guide the Committee, can you tell us whether there is a precedent for rerunning a vote on an amendment in Committee? If the Government do not want the amendment to the Bill to remain, is not the neatest approach for them to move that it be taken out on Report?
Greg Hands (Chelsea and Fulham) (Con): Further to that point of order, Mr Amess. There are three important points to make. First, the intention of the Committee, as expressed by you, is absolutely clear. The intention was that the amendment not be agreed to. That was reflected in the votes, with Opposition Members voting no and Government Members—both parties—voting yes. Secondly, when you announced the result of the vote—17 to 12—if the amendment had been carried, you would have said, “And therefore I declare the amendment carried” or “The amendment is thereby made.” Further, if the Opposition’s intention had been, as they now claim, that the amendment be agreed to, surely when you put the question that the clause stand part, you would have, and should have, said that the clause “as amended” be put to the Committee.
On all of those three occasions it was clear that the amendment, in the intention of the Committee and the intention of the Chairman, was not made. That was reflected in everything that happened thereafter. I think the intention of the Committee was clear. In the eyes of the Committee and in the eyes of the Chairman, the vote was clearly about whether the amendment be withdrawn. Therefore I think the Committee, wrongly as it turned out, thought that it was voting to withdraw the amendment, so now we should proceed to a vote on whether the amendment should be made.
Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op): Further to that point of order, Mr Amess. I appreciate the sincerity with which you made your statement. I must refer to the remarks made by my hon. Friend the Member for Leicester South about precedent. As another relatively new Member, I have learnt that the example of precedent is extremely important for future sittings. I, too, would be interested to know the examples of precedent that are being drawn on to make this decision, but also the possible consequences for future votes in Committees or in the House of us setting a new precedent. I would not want anything we do in this Committee inadvertently to have a negative impact on substantive and important decisions in future. I should appreciate your guidance on whether we are setting a dangerous new precedent here.
Andy McDonald (Middlesbrough) (Lab): Further to that point of order, Mr Amess. I thank you for how you have addressed the matter thus far. Ultimately I see this quite simply. A question about the amendment was put to us and a vote was taken. We cannot be in the business of trying to rewrite that or putting an interpretation on it. The words are the words. If a mistake was made, with the greatest respect, it should have been identified at the time, rather than trying to unravel it now. We cannot go back in time. It is not a matter of coming back to a vote and saying, “Please keep going until you get the right outcome.” It would be like the Republic of Ireland dealing with the European Union. It would not be the right way to go about business. It has happened. We just have to deal with the consequences of that as it is. We cannot try to put an interpretation on what was meant by it all. It is what it is, Mr Amess, and I respectfully suggest that the matter should remain as it was conducted.
John Cryer (Leyton and Wanstead) (Lab): Further to that point of order, Mr Amess, and to the points made by the hon. Member for Chelsea and Fulham. The way I read parliamentary procedure is that the intention of the Committee is not relevant. It is what happened in the Committee. If we had to base what happened in Committees or on the Floor of the House, as it is the same procedure to a large extent, on the intention of the House or the intention of the Committee rather than on what actually happened, we would have to rewrite an awful lot of “Erskine May” and an awful lot of parliamentary history—certainly the events of the 1970s and 1980s when a lot of precedent was created. We would have to go back and look again at precedents that were created during that era because we would have to examine the intention of the House or the intention of individual Committees.
Steve Baker (Wycombe) (Con): Further to that point of order, Mr Amess. I am most grateful for your candour. I am pretty sure that if any of my constituents were listening to our proceedings this morning they would be absolutely clear that we had all voted on leave to withdraw the amendment. They would also wonder why we are indulging in quite so much conversation on this matter, given the state of the country and the seriousness of the Bill before us. I think we should proceed as you suggested, Mr Amess, vote again and get on with the debate.
Fiona O'Donnell: Further to that point of order, Mr Amess. I cannot thank you enough for your patience and generosity. It is important that we get this right. I would like to suggest that the Committee was misled before it proceeded to a vote, as in a legal case a judge may misdirect a jury. I also seek clarification about precedents. If a Member of this House unintentionally goes through the wrong Lobby, my understanding is that they are not allowed to revisit the vote, although they can pass through the other Lobby, thereby cancelling their vote. However, the Member’s intention is not what is at stake, and their act in casting their vote stands.
Chris Leslie (Nottingham East) (Lab/Co-op): Further to that point of order, Mr Amess. I want to ask when you will address these points of order. Quite a few issues have been raised, and your ruling on those questions might take us forward.
I do have a point that you might be able to clarify, Mr Amess. In your earlier ruling, you said that you should have said that the clause was as amended, but that was a mistake. At least, I think that is what you said. It would be useful, and would give us clarity, for us to see the official record. Obviously, our proceedings are being transcribed verbatim as we speak. For the purpose of clearing this whole mess up, it would be useful to look at what actually happened and what was said at the time—regardless of hon. Members’ intentions and what was in their minds—to see what is on the record. Is it possible for us to look the official record, so we can see what was actually said?
Chris Evans (Islwyn) (Lab/Co-op): Further to that point of order, Mr Amess. Thank you for allowing me to indulge in a point of order. I came to this Committee late, and I was faced with Government and Opposition Whips speaking to you. I was not privy to that conversation, and I do not know what advice you were given. I would be grateful if you could relay it to the Committee.
Ian Mearns (Gateshead) (Lab): Further to that point of order, Mr Amess. It strikes me that the Clerk has said that he knew what was happening at the time. I know that this was adjacent to the adjournment for lunch, but why was it not said at the time? I wonder whether the best course of action now is for us to adjourn to get some clarification.
Sheila Gilmore (Edinburgh East) (Lab): Further to that point of order, Mr Amess. I was not here this morning because I was speaking on the Floor of the House in the railway debate. If we do vote again, would it be with the same personnel, or would we have to remember who was and was not here earlier?
Catherine McKinnell (Newcastle upon Tyne North) (Lab): Further to that point of order, Mr Amess. Thank you for being so generous in listening to the concerns of all members of the Committee on this matter. I want to comment very briefly on the point of order raised by the Government Whip, the hon. Member for Chelsea and Fulham. He used the words “clear” and “absolutely clear” about six times in his point of order. I beg to differ. There is a complete lack of clarity about exactly what happened, and what happened in the ensuing vote.
I agree with hon. Members that there will be clarity in Hansard, and there is clarity in terms of the vote. I want to reinforce the points made by hon. Members that it sets a dangerous precedent for us to try to undo, redo or rewrite a vote that has taken place. I submit that we need to accept the vote. The Government Whips, if necessary, need to deal with the consequences at a later stage in the proceedings, as my hon. Friend the Member for Leicester South suggested.
Yasmin Qureshi: If hon. Members give me the chance to speak, they will find out what I intend to say. My point of order is the same one that my hon. Friend the Member for Edinburgh East raised, which is that I was not here either.
Fiona O'Donnell: Further to that point of order, Mr Amess—I assure you that this will be my last one. I want to reinforce what my hon. Friend the Member for Newcastle upon Tyne North said. So that there can be absolutely no doubt about whether the Committee tried to rewrite history or make up for errors, wherever they were in the proceedings, there is an opportunity for the Government to try again, on Report, to amend clause 4. That seems to be an opportunity that places no doubt on the transparency and fairness that I know you would wish to uphold, Mr Amess. I have utter confidence in that, and that is how we should proceed.
Cathy Jamieson: Further to that point of order, Mr Amess. I had not intended to rise again, but I believe that the points of order raised by my hon. Friends are crucial, particularly on the issue of people who were not present for the original vote. If there is no precedent—I seek your guidance on that, Mr Amess—this situation could establish one. For example, people might be out of the Room when a vote is taken and, if people were unhappy with the result or with how the vote was conducted, they could be brought back in. I understood that locking the doors was crucial to that. I seek your guidance, Mr Amess, on the past and on what might be setting a precedent for the future.
The Chair: That will be the final point of order on the issue. I have listened carefully to what hon. Members have said and have taken all the points on board, but I am not going to respond in detail to each and every one.
In 1984 I was sitting in Committee Room 14, debating the rate-capping Bill, and everyone bar me had fallen asleep, when there was a Division. Even the Chairman
‘(4) The Chancellor of the Exchequer shall instruct the Office for Tax Simplification to publish by 31 March 2014 a report setting out proposals for a new, simplified Corporation Tax code, specifically addressing the potential for a simpler tax code to reduce tax avoidance, and the Chancellor shall place a copy of the report in the House of Commons Library.’.—(Nigel Mills.)
Cathy Jamieson: I appreciate that we have had a difficult series of discussions, and it was important that you took all the points of order, Mr Amess. At the risk of embarrassing my hon. Friend the Member for Airdrie and Shotts, I will reveal that she was not alive in 1984 when you were sitting on that Committee, Mr Amess.
Cathy Jamieson: Let us move on to clause 5. I want to raise a number of issues on the clause, which deals with the small profits rate and fractions for financial year 2013. We had much debate on the principles of corporation tax earlier on and I do not wish to repeat the points that were made.
The clause essentially unifies the small profits rate with the main rate for 2013/14; there will be only one corporation tax rate for non-ring-fenced profits, set at 20%—as we discussed earlier, the ring-fenced profits of North sea oil companies are treated differently—so firms with profits of up to £300,000 pay the small profits rate and those with profits between £300,000 and £1.5 million benefit from marginal relief. The clause also sets the fraction used for calculating the marginal relief from the main rate at three four-hundredths for all profits except ring-fenced profits, where the fraction is set at 11 four-hundredths. I am sure that those who looked on with interest at the constitutional wrangling
The alignment with the small profits rate is intended to remove the complications of tapering. However, I wish to raise a number of concerns with the Minister because some of the cuts that are being carried out by the public sector, and even the corporate sector, could mean that future job creation will come from a much larger number of small businesses. That was raised in an earlier debate, which was why I asked the hon. Member for Amber Valley about the discussions he had had with the Federation of Small Businesses in relation to his amendment. Small businesses are crucial to getting growth back into the economy. Therefore my question is: what will be the impact of this measure? Will it disproportionately benefit large businesses rather than small businesses?
I return to an issue that we raised earlier in the proceedings with the Minister. If Ministers want to help small firms, why do they not use the money left over from the Government’s failed national insurance rebate for new businesses to offer a one-year national insurance tax break for every small firm that takes on extra workers? I also asked the Minister earlier why the Government would not consider bringing forward the employer allowance—a measure that we welcomed—to 2014. Why not legislate for that in the Bill?
The Minister gave us a bit of a preview of what was coming down the line in the Queen’s Speech when he told us that there would be a national insurance contributions Bill. That will, no doubt, provide further work for many of the Members serving on this Committee and we have that to look forward to. I wonder, however, what consultation will be undertaken until that Bill comes in. Will the Minister engage further with small businesses on national insurance contributions to see whether that would provide more of a benefit to those small firms that will be the backbone of our local economy in the future?
I do not want to go over all of the ground that we covered in relation to corporation tax as, if we make sufficient progress, we will be able to do that when we get to clause 6. There are, however, particular questions that the Minister must answer at this stage, particularly in relation to the alignment and complications of tapering and how the impact of cuts in the public sector means that small businesses will have to step into that gap, rather than large businesses.
I again raise the question of confidence in the economy, which we discussed in relation to clause 4 this morning. Hon. Members will recall that there were several speeches about the fact that many businesses are now sitting on reserves of cash and are not investing because they are concerned that the economy is not improving overall. They have seen the flatlining and, as I have mentioned, we cannot rely on a collective sigh of relief from the Government that we are not in a triple-dip recession as enough of a message to send out to businesses that the economy is moving again.
James Duddridge: This morning, an Opposition Back Bencher mentioned the number of companies sitting on large amounts of cash that they are not investing. What is the source for that? I am disputing it; I was simply not aware of it.
Cathy Jamieson: I hate to go back to this point—we had so much discussion about the technicalities—but many of the indications from business are not only that people are concerned about the banks not lending but that they are waiting to see whether there will indeed be an upturn in the economy. The hon. Member for Amber Valley referred to the need to have a report and to consider the issue in the round to understand what is going on in the business sector in relation to corporation tax and the taxation regime overall.
James Duddridge: Is the hon. Lady saying that the evidence is anecdotal from chatting to local businesses, or is there a report that refers to those large capital amounts? Most businesses that I deal with—I do not know whether Rochford and Southend East is any different—have debt requirements that they still have to finance.
Cathy Jamieson: I certainly take very seriously the anecdotal evidence from my local businesses, but the source is not simply anecdotal evidence, because figures and reports—for example, from the Bank of England—back it up. I hope that all hon. Members will talk not only to small businesses but to others. This morning, we discussed the importance of the manufacturing sector and how to ensure that such firms grow, become more involved in exporting and up their game to take on additional staff.
I again ask the Minister to explain how the measure will contribute to achieving the growth required and to job creation. I do not want to rehearse all our arguments from previous sittings, but we talked earlier about efforts to create more jobs, get people back into well-paid employment, create more exports, help the manufacturing sector, create a retail sector recovery and support service industries. I want the Minister to tell us specifically how the measure will help in such processes in the year ahead.
I understand the point that the Minister made earlier—he was of course technically correct—just as we understand the difference between what will happen in the Finance Bill and what will happen in the national insurance contributions Bill. Will the Minister also take into account the points made in earlier debates? If there is not going to be a report about corporation tax issues, will he say more about which of the points made by hon. Members on both sides of the Committee he intends to pick up? I recall that one of his hon. Friends reflected some of our concerns that corporation tax reform is not the factor that will help small businesses in particular; a range of other measures could also be taken forward.
The Exchequer Secretary to the Treasury (Mr David Gauke): It is a great pleasure to welcome you back to a livelier final afternoon of this Session than we might have anticipated, Mr Amess. Clause 5 confirms that the small profits rate of corporation tax for the year beginning 1 April 2013 remains at 20%. It also sets the standard fraction for calculating marginal relief at three four-hundredths. This reflects the 1% reduction in the main
In addition to those paying 20%, 41,000 companies with profits in excess of £300,000 but less than £1.5 million benefit from marginal relief from the main rate of corporation tax. The marginal relief from the main rate ensures that companies pay a marginally increasing rate of corporation tax as their profits rise. This clause also sets the standard fraction used to calculate marginal relief at three four-hundredths, in line with the reduction in the main rate from 24% to 23%.
Looking ahead, in the Finance Bill 2014 we will legislate to remove the small profits rate from 1 April 2015, to create a single unified rate of corporation tax of 20%. Unification of the main rate and small profits rate itself creates a simpler, more competitive and less burdensome corporate tax regime—a point that I am sure will be welcomed by all members of the Committee, not least by my hon. Friend the Member for Amber Valley. It is something that many have recommended, including the Office of Tax Simplification. Support for this move also comes from the Chairman of the Treasury Select Committee, my hon. Friend the Member for Chichester (Mr Tyrie), who commended a substantial cut in corporation tax and its simplification in one go.
For the avoidance of doubt, it is worth stressing that removing the small profit rate does not reflect any change in the Government’s commitment to support small businesses. Indeed, since 2010 this Government have provided, and continue to provide, increasing support for small businesses to help meet our ambition to make the UK the best place in Europe to start, finance and grow a business. In the Budget, the Chancellor announced a range of measures, many of which we will debate in due course, which will help small businesses to succeed and grow. These measures include the £2,000 employment allowance for all businesses to reduce their employer national insurance contributions bill each year. This will reduce the costs of employment, particularly for small businesses. I touched on that this morning and I suspect that I will be requested to say more about it this afternoon.
Stephen Doughty: The Minister has given a long list of measures that the Government are supposed to be taking to support small businesses. I speak regularly to a number of small businesses in my constituency, and they have a much less positive view of what the Government are doing. If the Minister is doing all this to support the small business community, why are we seeing the slowest rate of recovery in growth for over 100 years?
Mr Gauke: We have, of course, seen figures this morning showing that the economy is growing. That is something that we certainly welcome on this side of the Committee. We recognise that these are difficult economic conditions. However it should be pointed out that over the time in which the Government have been in place,
Stephen Doughty: I appreciate the Minister giving way once more. Having spoken to a number of small businesses in my constituency, I have to say that they do not thank the UK Government for the fact that they can take on new workers; they thank the Welsh Labour Government for supporting them with the Jobs Growth Wales fund, which has enabled many small businesses to take on extra staff in what, as he has described, are very difficult economic circumstances.
Mr Gauke: That is an interesting observation; no doubt the hon. Gentleman will be presenting evidence that job creation in Wales is substantially greater than in the rest of the United Kingdom. I await that evidence with interest.
Pamela Nash: I thank the Minister for giving way. I am sure that my hon. Friends will do exactly as he suggests. He mentioned that 1.25 million private sector jobs have been created; does he have figures on how many of those are part time?
Mr Gauke: We not should dismiss part-time jobs; they are an important part of our economy and many people value them, so let us not be sniffy about them. The fact is that the number of working hours is also increasing.
Sheila Gilmore: Whenever they are presented with criticisms about the slow rate of growth, the Government respond as the Minister just did, with the 1.25 million private sector jobs. However, the quality and type of jobs may be one of the reasons why, despite the creation of those jobs, growth is so sluggish. Will he investigate the situation I have discovered in my area, where 55 out of 75 new shop assistant jobs advertised to jobseekers were for roles distributing Kleeneze catalogues and then trying to make sales? Those sorts of jobs would normally be advertised as a way to boost income rather than as something that in any sense provides a living wage.
Mr Gauke: Nobody on the Government side will deny that economic conditions are difficult. It is pleasing that the economy is growing, but we would all like growth to be faster and the economy to be stronger.
Cathy Jamieson: The Minister will recall the debate that we had on clause 4 about types of jobs. No one on the Opposition side is suggesting that there are some jobs—for example, in retail—that should not be available at all; the issue is whether people have enough hours and whether those jobs pay enough to give them a sustainable quality of life. Will the Minister explain how the measures that he is proposing are going to give a boost to the manufacturing sector, for example, to ensure that businesses are able to take on more workers?
Mr Gauke: Let me turn directly to the steps that the Government are taking to ensure that the UK economy grows more strongly than it otherwise would. We believe that we should have a competitive tax system and are reducing corporation tax; looking specifically at clause 5, we have a lower rate of corporation tax than the previous Government intended there to be; and we are bringing in an employment allowance that will save every business that employs people £2,000 a year. Unlike the Opposition proposals we have heard, which were for a complicated scheme that would apply only to small businesses that took on staff, this scheme will be much simpler to administer, and will apply very broadly, across the board. The complicated proposals that we have heard from the Opposition are not workable, but our measures will be a radical change and will make a dramatic difference for businesses across the piece. That is why we are taking steps such as freezing fuel duty—we are not putting that up—which is also helping businesses. We are a Government who are taking practical action to help businesses, create jobs, and ensure that the United Kingdom wins the global race and that businesses, whether big or small, can succeed despite the fact that we were left with the most awful deficit by the previous Government, which means that we have no money to spend.
Paul Uppal (Wolverhampton South West) (Con): This debate reminds me of my time on the Welfare Reform Bill Committee, where there seemed to be a general consensus on both sides that whatever the nature of jobs, even part-time micro jobs, they are an essential step in getting people out of poverty and into the habit of work. Moreover, many part-time jobs lead on to full-time jobs, so it is a win-win situation for everybody.
Mr Gauke: My hon. Friend makes an important point. It was not that long ago when the Labour party, or some of its supporters, was predicting that unemployment would rise to 3 million or 4 million—[Interruption.]— 5 million. There is a bit of an auction going on. We hear 6 million from the hon. Gentleman at the back. The concern was raised, and it is a legitimate one, that unemployment causes long-term difficulties and that when people get out of the habit of working, it is a great struggle to recover that good habit. Although the economy has not performed as well as anticipated, the employment performance has been a lot better, and that is something
Fiona O'Donnell: Some time back, the Minister said that we should all be united in welcoming any progress that the Government make in reducing the deficit. I am sure that he is aware that figures from the House of Commons Library show that under his Government, 74% of the burden of it has fallen on women. How can we all celebrate and be united? How can we believe that we are all in it together when women are disproportionately paying the price?
Mr Gauke: I will not digress too long in saying that we believe that that analysis is somewhat simplistic and applies an assessment to financial support that may be paid more often than not to the woman but is there to support a household. It is also worth pointing out that more women are in employment than at any time in our history, and that should not be ignored.
Rory Stewart: The Minister is being immensely generous in giving way. May I encourage him to expand support in terms of employer’s national insurance further? It is a wonderful initiative and, given that we are so focused on jobs, a real priority to pursue.
Mr Gauke: I shall note that as an early Budget representation from my hon. Friend. I also thank him for saying that I have been immensely generous. Looking at the clock, I should perhaps cease that generosity, although I shall make one last exception.
Cathy Jamieson: I thank the Minister for being extremely generous. I wanted to pick him up on the employment allowance, which he rightly says will give some support to all firms. He seemed, however, to disassociate that from job creation, and I wonder whether I have picked him up incorrectly. Does he have any indication of how many jobs would be created as a result of that additional allowance?
Mr Gauke: It is difficult to put a precise number on that. However, an environment that allows a business to take on, for example, its first employee at £22,000 a year without paying any employer’s national insurance contributions, or two employees at £15,000 a year without paying any such contributions, has to be beneficial. [ Interruption. ] As the bell tolls, let me conclude by saying that the Bill confirms the small profits rate of corporation tax for 2013-14 at 20%, representing the Government’s continued commitment to supporting growth and investment in small business.