Brooks Newmark backs Government on efforts to attract big wealth creators to UK

1st July 2013

Brooks Newmark backs the Government on its efforts to make the UK’s tax environment attractive and competitive internationally to attract big wealth creators in manufacturing and hi-tech industry.

Mr Brooks Newmark (Braintree) (Con): The hon. Member for Islwyn (Chris Evans) focused on our policies. The inconvenient truth for the Labour party is that it had the opportunity for 13 years to test the 50p rate to destruction, but we quickly saw the evidence of the Laffer curve, which shows that, as we lower tax rates, we can collect more revenue. The Government should be congratulated on finding alternative ways of trying to get the rich to pay their just deserts, if the Labour party wants them to do that. In fact the Government have collected more money from the rich by lowering the rate from 50p to 45p and by looking at other ways to collect that money.

Mr Gauke: My hon. Friend is absolutely right. The point is not whether we should seek to get a significant contribution from the wealthiest; it is how we go about doing it. There is a real problem with a very high rate of income tax directed at the most mobile people, who have many more options in how they respond. Not surprisingly, the evidence that the HMRC evaluation discovered is that there is a significant behavioural response.

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Mr Newmark: I sympathise somewhat with the point of the hon. Member for Islwyn (Chris Evans) about his and his party’s desire to target bankers, but if we want to create an entrepreneurial society, we must realise that not all the big wealth creators are bankers; they are also people in manufacturing, hi-tech industry and so forth. If we want them to settle in the UK, we must make our tax environment attractive and competitive internationally.

Mr Gauke: I entirely agree with my hon. Friend. The challenge for any sensible Government has got to be how to ensure both that the wealthiest pay a fair share and that we encourage a spirit and culture of entrepreneurialism. The 50p rate simply failed to deliver that.

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Mr Newmark: Following on from what my right hon. Friend the Member for Wokingham (Mr Redwood) said, I would like to ask the hon. Gentleman whether he shares my concern that many elderly people are asset rich but cash poor. How would his proposal deal with that particular challenge?

Chris Leslie: I am not sure how many elderly people would find themselves in that predicament, but such circumstances ought to be dealt with in the design of a mansion tax....
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Mr Newmark: I know that maths is not the hon. Gentleman’s strongest suit, because in Committee we heard that he could raise £2 billion from £1.85 billion in bonus taxes. The Minister has been very clear that £2 billion divided by 55,000 is £36,000 on average. Does the hon. Gentleman at least accept the principle that this is going to cost taxpayers £36,000 per household on average, not in relation to bands?

Chris Leslie: The Government have apparently undertaken their own valuation exercise, perhaps stealthily, so they could publish the information on the numbers of properties across the country. Perhaps the Deputy Prime Minister, with his 16 special advisers, fanned out across the country to look at the issue. I do not know how they found out the 55,000 figure. If the hon. Gentleman has that information and publishes it, I will be interested to see it, but I am afraid I cannot be certain that it is the correct figure. Labour Members have to be very careful and cautious in taxation matters. We want to make sure that all the figures are very clear and well worked through instead of taking the Exchequer Secretary’s back-of-a-fag-packet approach. I take it as a commitment from him that all this information will be published in the public domain, and then perhaps we can work on devising this measure in a less partisan way.

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Mr Newmark: I congratulate the Government on their work, particularly in the G8 meeting, in trying to co-ordinate efforts to prevent abuse by multinational companies. Such companies are extremely portable and, does he not agree that the big problem is that if we do not act on a multi-jurisdictional basis, they can move anywhere? If we take unilateral action and they move, that risks jobs in this country—that is why we must never act unilaterally in dealing with such situations.

8.15 pm

Mr Gauke: My hon. Friend makes a very important point. Elements of a business are highly portable. In 2007-08, for example, the UK’s position on headquartered companies was very uncompetitive because of our controlled foreign companies regime and a number of businesses moved their headquarters out of the UK and went elsewhere, which had an impact not just through lost corporation tax revenue but more widely, as it meant that individuals paying income tax and decision making were moved out of the UK. That was not in the UK’s long-term interest, so we reversed the situation. Now we have a much more competitive position, which means that companies are moving back to the UK and that new businesses are moving here, too.

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Mr Newmark: Not that I like to pick on individual countries, but does my hon. Friend agree that the evidence from France, with a relatively newly elected left-wing Government, suggests that businesses and wealthy individuals are moving across the channel in their droves to set up business in the UK?

Mr Gauke: I would say—I think that this is the most tactful way of putting it—that the Government are determined to send the signal that the UK is open for business. That is how we can win the global race. Other Governments might wish to take other approaches, and that is for them to decide. For the UK, we believe in open markets and a competitive tax system—but a tax system, none the less, in which businesses pay the tax they should and in which economic activity is properly taxed.

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Mr Newmark: I felt that the hon. Gentleman might need to refuel a little, as he was running out of breath. I am curious—given that many of the unions and pension funds invest in funds that invest in offshore places such as the Cayman Islands, making a lot of money for ex-union members and pensioners, will he suggest that the Labour party recommends that those unions and pension funds no longer use fund managers who invest in those offshore entities?

Mr Speaker: Order. I have known the hon. Member for Bassetlaw (John Mann) for 27 years and I can think of a long list of adjectives that could, in various scenarios, be applied to him, but breathless is not one of them.

John Mann: But on this occasion, Mr Speaker—one scratches one’s head at some interventions, which are so inaccurate, so irrelevant and so unconnected to the clause. I will not rise to the bait, Mr Speaker, and risk your ire by explaining to the hon. Member for Braintree (Mr Newmark) exactly how the unions invest their money, interesting though that subject would be. I fear your wrath, Mr Speaker, if I did so. Instead, I shall return to the key core theme of the clauses, which is morality—

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