Mr. Michael Meacher (Oldham, West and Royton) (Lab): The hon. Member for Dundee, East (Stewart Hosie) made several telling comments across the range of financial and industrial policy. I hope that he will forgive me if I do not follow him down that track, except with respect to his final point, which was about the 10p tax rate. I want, in a short speech, to concentrate on the most politically contentious part of the Bill, arising out of the abolition of the 10p rate. I
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hope that something of what I say will answer his final point. I want to make proposals that are designed to be helpful in preserving the Government’s well-earned record for alleviating poverty while ensuring that there is no shortfall in revenue to the Treasury. It is all very well to propose schemes that will cost money if we are to protect the poorest; the question is where the money comes from.
The right hon. and learned Member for Folkestone and Hythe (Mr. Howard), who is no longer here, made a most extraordinary speech, purporting to peel away one by one the supposed conspiratorial motives of the Prime Minister. Rather, it reminded me of Salome discarding her veils one by one, although the final revelation of Salome was a great deal more telling than the final disclosure of the right hon. and learned Gentleman. I thought it was patent nonsense.
The one really positive thing to come out of this afternoon’s debate—
Mr. Hoban: Will the right hon. Gentleman give way?
Mr. Meacher: The hon. Gentleman wishes to defend his former leader.
Mr. Hoban: I wish to ask the right hon. Gentleman a question.
If he dismisses the arguments made by my right hon. and learned Friend the Member for Folkestone and Hythe (Mr. Howard), does he subscribe to the view either that the former Chancellor, now the Prime Minister, was incompetent in designing a situation with 5.3 million net losers or that he did that deliberately?
Mr. Meacher: I do not subscribe to any of the theories that have been pumped out from the Opposition Benches. They are all absurd. If one really wants to find out, the best thing to do is ask the Prime Minister exactly what his reasons were. The absurdities that have been pressed by those on the other side of the House do not do them much credit.
The one really positive thing that has come out of today’s debate is the fact that we agree that we need to look at the wider tax package to decide how we can protect the poorest in our society. That is exactly what I propose to try to address. It is widely and quite properly acknowledged that one of the Government’s major achievements has been to remove 750,000 children from poverty. In addition, they have significantly enhanced the incomes of the poorest households, right across the board, through a combination of tax credits, pension credit, the national minimum wage and improving training skills for employment. That is a thoroughly good and reputable record, and it would be a tragedy if the good will that comes from that substantial gain to the poorer half or quarter of society were undermined by this unfortunate mishap over the abolition of the 10p tax rate.
Mr. Graham Stuart: Will the right hon. Gentleman give way?
Mr. Meacher: I have only just started my speech. The hon. Gentleman likes to bounce up and down, and I will give him one chance.
Mr. Stuart: I am extremely grateful to the right hon. Gentleman for giving way. He suggests that everyone has benefited under this Government, yet among
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working childless households the number of those in poverty has increased by 500,000. How does he explain that?
Mr. Meacher: What I am saying is that the incomes of the poorest tenth—the lowest decile—in society have improved significantly, which is very different from what happened after 18 years of Conservative government. I am one of those who would like them to improve considerably more—there are still too many poor people in our society—but the Government have not received proper credit for what they have done.
I recognise all the problems that many other Members have described. We need to develop a package to protect the lower-paid taxpayers, while at the same time solving the really big problem of how to recoup the potential revenue that would be lost by the Treasury as a result of any such package. I think that that could be done.
Michael Connarty: The hon. Member for Beverley and Holderness (Mr. Stuart) pointed to the fact that many single working people who do not receive any tax credits are in relative poverty because the economy has expanded, and the upper echelons are therefore earning much more than they did before. Should the Government not seriously consider the trade unions’ recommendation that the minimum wage should be 50 per cent. of the median wage in the country? That would have started it off at £5 an hour, and would now be giving people enough money not to be in poverty even if they were single.
Mr. Meacher: I have always been a supporter of the national minimum wage. Fifteen or 20 years ago, when I was a Back Bencher, I promoted a private Member’s Bill proposing its introduction before it was finally introduced by this Government. The rate appears to be slowly increasing—it is now £5.52 an hour—and I believe that, without any loss of employment, it could rapidly be raised to £6.50 and probably to £7. So I rather agree with what my hon. Friend has said.
The cost of restoring the 10p rate would be £6.6 billion. To concentrate the gain on those in need—the Institute for Fiscal Studies spoke of 5.3 million losers; I do not know whether that is the exact figure, but the number is clearly substantial—one obvious mechanism would be to limit the restoration to poorer taxpayers and those who pay the standard rate of tax. As about 12 per cent. of taxpayers pay the higher rate, that would immediately recoup £2.4 billion. The problem would be how to raise the remaining £4.2 billion. There are several ways in which we could make the tax system a whole lot fairer, and I hope that in Committee next week we can examine amendments suggesting how that could be done.
It is probably little known that although United Kingdom-based individuals hold some £284 billion in shares or UK-based unit or investment trusts, the total declared disposal value of quoted shares in 2004-05—the last year for which we have figures—was only £5.8 billion, or just 2 per cent. of their shareholdings. It is inconceivable that, on average, their portfolios are changed in total once every 50 years. In fact, it is known that the average market holding at that time was only 14 months. The first strand of a strategy of recoupment for the Treasury could be the ending of what is clearly substantial undeclared share trading on
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the London stock exchange. Even if individuals traded their portfolios only half as frequently as the actual recorded rate, every 14 months—and we can be certain that that would be an underestimate of the degree to which they trade—if the proceeds were collected, stopping evasion would still raise the revenue take by at least £4 billion a year. Collection could be guaranteed by a requirement for automatic declaration by the stockbroker of all such deals.
Another remarkable fact is that nearly half all commercial property in the UK—I think the exact figure is 45 per cent.—is now owned by foreign nationals. I have no objection to that. Yet they are unlikely to pay UK tax on their UK property sales, unlike the practice in many other countries where non-residents do pay tax on their property gains. In addition to the revenue lost, that distorts the UK market. Closing this gap by charging capital gains tax on the sales of foreign holdings could well form a second strand of the strategy. Property disposals in 2004-05, in the latest information we have, accounted for nearly a third of all reported capital gains, amounting to £5.3 billion. That suggests that the gains to foreign property owners amounted to some £2.4 billion. Eighteen per cent. capital gains tax would yield nearly a further £0.5 billion.
My third point is this. It may not be realised that a fifth of all financial assets sold and subject to capital gains tax have been held for less than a year. Gains in terms of liability to capital gains tax, however, are meant to arise on investments, which, by definition, are usually meant to be long-term holdings. Those arising from short-term trades are likely not to have arisen from investments at all. It is clearly right that the profit in that case should be subject to income tax. More than £1 billion of chargeable gains was declared on these disposals in 2004-05 and the percentage rate was only 13 per cent.—a far lower proportion of profit compared with disposals as a whole, which amounted to 52 per cent. Ending that anomaly could also provide the third arm of recoupment for the Treasury and would yield at least a further £0.5 billion.
Those three actions alone—I am well aware that there are many others—would raise around £5 billion a year and would certainly be more than enough to recover the revenue resulting from restoring the 10p tax rate while concentrating its benefit on the lower paid, which seems the sensible way to do it. Of course I would be the first to say that there are many other options that the Chancellor could equally consider. I want to mention one or two of them very quickly.
Recent research prepared by Richard Murphy, one of the country’s foremost tax experts, found that the 50 largest UK companies almost always pay 5 per cent. less tax on average than they declare on their accounts. As a result, the actual corporation tax rate paid by these UK companies in 2006 was 22.5 per cent., when the rate set by Parliament was 30 per cent. By the end of 2006, the cumulative tax savings recorded in the accounts of the 50 largest companies amounted to no less than a staggering £47 billion from deferred tax charges for which no date of payment is set. The amount actually exceeded the total tax paid by all companies in 2006 by some £2 billion.
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Frankly, it is indefensible that persons on £200 a week should be required to pay more tax when the 50 largest companies each currently receive on average £1 billion a year of tax benefit. [ Interruption. ] I am being asked to finish in time and I will certainly do so. I will make one further point.
If these sources of revenue still are insufficient for the purpose—they are more than sufficient in my view—continuing the crackdown on tax haven abuse following the German lead, which I think is very helpful, must be pursued vigorously. It has already led to more than 60,000 people admitting substantial undeclared income in offshore bank accounts in tax havens such as the Channel Islands and the Isle of Man, with, the Revenue expects, the prospect of £500 million in tax recovery. Her Majesty’s Revenue and Customs is rightly targeting those who have declined to make a voluntary declaration, and no doubt much more will be brought to light.
All of this raises the spectre of redistribution from rich to poor, which I am glad has already been mentioned in the debate. That has been a political taboo subject in this country for the past 30 years. However, with inequality between the highest and lowest incomes currently growing faster than at any time in recent history, and also with rapidly increasing food, energy and housing costs for the poorest, redistribution has never been more justified—and it would, at last, signify that we had a Labour Government who really meant business.
