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This matter is incredibly important to many of our constituents, not least in areas such as Cornwall. Many people have spoken about the problems that rural areas face, but the problem is not just the rurality of such areas, but the fact that they are peripheral and a long way from the markets. Cornish businesses have to transport their goods some 300 miles just to get to London, which involves a huge additional cost. The 38% increase in the fuel price since 2007 has had a massive impact.

I associate myself with the comments of my hon. Friend the Member for High Peak (Andrew Bingham) in which he congratulated the Government on what they have done on this issue. They have not introduced any of the tax rises that had been planned and, as a result, fuel prices are supposedly 10p lower than they would have been. However, there is no point in cutting taxes if the money that is saved ends up not in the pockets of our constituents, but in the pockets of the people who are rigging the fuel market.

Penny Mordaunt (Portsmouth North) (Con): As well as the practical hardships that my hon. Friend has touched on, does he agree that what gets up our constituents’ noses is that while they have been working harder, making sacrifices and helping each other out to get the economy back on track, these people might have set out to rip them off?

George Eustice: That is absolutely right. I was going to say that one of the great indictments is that prices are always quick to rise, but very slow to fall when the markets go the other way, as my hon. Friend the Member for Harlow pointed out in his opening remarks.

I was interested in the proposal of the former Secretary of State for Transport, my right hon. Friend the Member for Putney (Justine Greening), for a transparent wholesale price tracking system, through which the major fuel distributors would voluntarily make clear the basis on which they calculate their prices and demonstrate the link between the prices that they charge at the pump and the wholesale market price.

I am concerned about the impact of supermarkets dominating the market in local areas by reducing their prices to snuff out other retailers and, once they have the pitch to themselves, putting the prices back up. Hon. Members have spoken about the disparities between different areas. Cornwall has lost all its Jet garages, which have been taken over by Texaco. The already limited choice of retailers has become more limited.

The biggest scandal is the allegation of price fixing. I welcome the OFT’s call for evidence. It should follow that through with an investigation. As a Conservative, I have no problem with markets when they work properly. In fact, I think that speculation has a role to play. The futures markets have a role to play in helping businesses manage risk. However, my hon. Friend the Member for Harlow gave evidence that there might be significant rigging of the market, with certain futures being placed and then withdrawn for no reason and a total lack of transparency about who holds those futures, which is a real problem. As Conservatives, we will object if there has been market rigging in the way that we saw with LIBOR. For that reason, I believe that the OFT should follow through its call for evidence with a full-scale investigation.

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2.44 pm

Mr Iain McKenzie (Inverclyde) (Lab): I congratulate the hon. Member for Harlow (Robert Halfon) on securing this important debate. Many of my constituents have contacted me on the subject of fuel prices over the past few months, and they are extremely concerned, because there is no doubt that high fuel prices are hitting them hard at a time when their families are being squeezed by higher food, gas and electricity prices.

In fact the situation is even worse in my constituency, because one large retail outlet has a near-monopoly, which means that petrol can cost drivers in my area an average of between 3p and 5p a litre more than it does people in our neighbouring constituencies. That is tending to drive business and customers out of Inverclyde and into neighbouring areas in search of cheaper fuel to fill up their tanks.

Bizarrely, that large retail outlet, Tesco, tells my constituents that if they spend between £80 and £100 in the store they will receive a voucher giving them between 3p and 5p off a litre of petrol. How generous of it, and how astute at the same time—it is winning both ways. How is it that someone can shop in the store and get 5p off at the pump, but not pull into the petrol station and receive the same price? It makes me wonder at what price Tesco is receiving its petrol. We have to examine the whole supply chain by which fuel reaches our pumps, because at each step of the way people are making large profits.

Inverclyde could not be described as a rural constituency, but as far as such retailers are concerned we are a captive constituency. When the oil prices go up we see an almost instant increase at the pumps, but when oil prices go down it seems to take for ever for the price to get lower, if it does at all. Along with my constituents, I therefore welcome the debate so that we can hold the fuel retailers to account and have them justify not only the high price of fuel but their sluggish reductions to fuel prices.

I must point out that it is not only the big, bad oil companies and fuel retailers that are hiking up the price of petrol. The Government are also adding to the cost. They hiked up VAT to 20% and applied it to fuel, and we know that high fuel tax hits the poorest in our society who need their cars the most, either to get to work or to visit people. It is not big businesses but hard-working families who pay that money, and those families are finding it increasingly expensive to fill up their cars. High fuel prices are having a devastating effect on my community, and a cut in fuel duty would stimulate growth and create jobs.

Only the other day I was told that a staggering 30% of lorries carrying goods from Scotland to the south-east are from outside the UK, and so have the privilege of being able to fill up with cheap diesel and petrol from the continent. If the Government are really serious about making an instant impact at the pumps, they should take the first step and cut VAT on fuel.

2.48 pm

Jake Berry (Rossendale and Darwen) (Con): I start by paying tribute to my hon. Friend the Member for Harlow (Robert Halfon) for securing the debate. It is my privilege to speak in it. I read his allegations in The Sun today about the manipulation of oil prices. A lot of

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us have been outraged by the alleged manipulation of LIBOR, but the manipulation of fuel prices will have much more of an effect on our constituents. They feel the pain that it causes every single week when they fill up their car.

I want to focus on the local market in my constituency of Rossendale and Darwen. I spoke about it last June and in my view it was then and remains a broken market. Rossendale is near the town of Bury and Darwen is near the town of Bolton, so, to provide a comparison, I visited petrol stations in both places. At its peak, there was a 5p difference in fuel costs between Bury and Rossendale and between Bolton and Darwen. Rossendale and Darwen are both ribbon developments, like so many of the Lancashire industrial towns along the river valley, so someone who lives in either place is forced to commute long distances because of the nature of our community.

At this point, I want to pay special tribute to my local paper, the Rossendale Free Press—I hope it will publicise this speech, of course. With me, earlier this summer, it launched a “Rip off at the pumps” campaign. This is a positive example I can give to colleagues of where they can lead and affect the price of petrol or diesel in their own patch. We took the price at our local Tesco and compared it with the price at the Asda in Bury, and, as I said, there was a 5p difference. We called on people who lived locally not to buy their fuel at Tesco until that price was brought down. I personally met representatives of Tesco here in Westminster and asked how they arrived at that price. They told me that they drew a 3 mile geographical line around the Tesco store in Rawtenstall and used prices in that area as a comparison and basis for theirs, but what they did not say was that the only other major petrol retailer with which they were comparing their prices was also Tesco. They were both fixing and making the price in one market, which is why I think that the market is broken.

Earlier today, I checked the price difference again following the campaign run by me and the Rossendale Free Press. Petrol in Asda is Pilsworth is now £1.37.7 a litre, whereas at the Tesco in Rawtenstall it is £1.37.9. We have taken the difference down from 5p to less than half a pence. That is something positive that we can all do as Members of this House. We should not suffer discrimination at our petrol pumps for living in a rural community and we should do something about it. I hope that by running their own “Rip off at the pumps” campaigns, hon. Members can bring prices down in their area.

Jason McCartney (Colne Valley) (Con): Will my hon. Friend give way?

Jake Berry: I am sorry, but I will not.

The Government have taken action. People who have to put fuel in their van to go to work or in their car to go to school feel the squeeze at the pumps and I pay tribute to my right hon. Friend the Chancellor for freezing the fuel duty rise and saving everyone 10p a litre, putting the fuel back in our economy so that people can go to work.

2.53 pm

Justin Tomlinson (North Swindon) (Con): I congratulate my hon. Friend the Member for Harlow (Robert Halfon), who has a fantastic track record of leading on this

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extremely important issue. This is yet another debate in which I am pleased to support him. I am also proud to be a member of the FairFuel UK and PetrolPromise campaigns, which are bringing this issue to the forefront.

Petrol prices have been increasing for decades under the twin pressure of rises in fuel duty and oil prices. The previous Labour Government hiked fuel duty 12 times in 13 years and it always amazes me that the Opposition are in such denial about that. They were very quick to take credit when they increased spending on public services, so they should also take credit for how they paid for it. With uncertainty in the middle east and limited resources, global oil prices will continue to rise. Together, those factors have stretched motorists to breaking point, so that many of them are priced out of their cars and businesses struggle with additional costs.

I welcome the Government’s move to scrap Labour’s further six planned rises and the modest but welcome 1p cut in fuel duty. Fuel is about 10p cheaper than it would have been had the former plans gone through, which more than covers any changes under VAT.

I accept that the wrecked economy we inherited means that money is tight and that we cannot just wave a magic wand. I surveyed the good people of my constituency, however, and asked them what their priority would be if they were Chancellor and suddenly inherited some money to play with. The choices were VAT, income tax, inheritance tax, capital gains tax, corporation tax or fuel duty. Fuel duty was by far the most popular, by a significant distance. I asked residents why that was the case, and I will use the Government’s changes to income tax thresholds to illustrate my point. The changes to income tax were welcomed because they took 2 million people out of paying tax altogether and benefited 24 million others. However, people could not say how much they had benefited personally, but the one tax they could describe was the cost of fuel, which is a clearly displayed, tangible cost. If we do one thing to kick-start and boost consumer confidence, it should be to cut fuel duty. My plea to the Chancellor is this: as and when he finds the money, a cut in fuel duty should be the No. 1 priority to boost the economy.

Duncan Hames: My constituent, Michael Hudston, campaigns assertively on this issue and he is acutely aware of how much tax he pays. When he fills up at the pump, he pays an effective rate of tax of 146%. Interestingly, three years ago it was as high as 200%, which demonstrates the point my hon. Friend was making, which is that, so far, tax changes have not made the situation worse in the way alleged by Labour Members.

Justin Tomlinson: I thank my hon. Friend and agree with his comments. I remember that on the day of the 1997 general election—not a particularly happy memory for the Conservative party—I paid 57p a litre to fill my car.

My hon. Friend the Member for Harlow presented evidence about how the oil industry is acting, and how it is quick to pass on any rise in oil prices but slow to pass on cuts, and all parties are united in the belief that much needs to be done. The statistic given was that for every 10p fall in the wholesale price, an average of 7p is passed on to the consumer. I therefore welcome the

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decision by the Office of Fair Trading to investigate the actions of the oil market. All local residents will be keen to know whether they are being defrauded and ripped off, which I think we all suspect is the case.

We must accept that we will not see cuts to fuel duty in the short term, and that world oil prices will continue to rise. As demand grows and resources are limited, pressure will increase and we must look at the alternatives. I welcome the fact that in my constituency, Honda UK, in conjunction with BOC, has taken advantage of Government grants and created the first open-access hydrogen refuelling station. My hon. Friend the Member for South Swindon (Mr Buckland) and I lobbied hard to ensure that that remains in place. The key for those alternatives is the availability of refuelling infrastructure for all the different resources. We must invest in those alternatives so that we can deal with the pressures that I have mentioned.

Several hon. Members rose—

Mr Deputy Speaker (Mr Lindsay Hoyle): Order. I am going to drop the time limit to three minutes in order to get everybody in. If anybody intervenes again, somebody will drop off the end of the list, and I am trying not to let that happen.

2.57 pm

David Mowat (Warrington South) (Con): I congratulate my hon. Friend the Member for Harlow (Robert Halfon) on securing this debate; he has been redoubtable on this important subject. Fuel prices are indeed regressive, and it is therefore important to look at the evidence for the issues that the OFT is to consider. I am pleased that the OFT will consider this matter, and that the previous Secretary of State for Transport asked for more transparency in the wholesale market. Markets need to be seen to be working by being transparent.

Let me return to the previous OFT review on this issue in 1998. It concluded that the market was not rigged, with the possible exception of the Scottish highlands and islands, which have particular issues about clear market share and so on. Since the 1998 report, the structure of the market has changed and oil companies have become much less dominant. The retail market is now 40% supermarkets, 30% oil companies, and 30% independent—the oil companies have left the retail market. There are seven refineries in this country—possibly now six because the one at Coryton has closed—and the oil industry, as understood in this debate, owns two of them.

Let us look at the evidence. We have heard about postcode pricing, and it is true that there are differences in prices. Hon. Members have also said that the fact that oil prices are the same demonstrates that the market is rigged, and we must choose which of those two problems is greater. If prices are the same, it is arguably a perfect market. Perhaps it is true that prices go up more quickly than they come down, but the OFT must look at the evidence.

The counter-evidence on the cartel is that oil companies are leaving UK. If there is a cartel, it is not a very good one—it does not appear to have been done well. Further counter-evidence is that the refinery and retail margin in the UK is among the lowest in Europe. That is odd.

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Hon. Members have mentioned regulation in Germany, but Germany has a higher retail and refinery margin than the UK, as have Spain, Sweden, Italy and others.

If Members have evidence of a cartel, they must put it before the criminal authorities. A cartel is a criminal offence and directors can go to prison. We should not use the word lightly.

3 pm

Mr Marcus Jones (Nuneaton) (Con): I congratulate my hon. Friend the Member for Harlow (Robert Halfon), who is a doughty campaigner on fuel prices. He should be thanked by the general public throughout the country for that. The problem is dear to many of my constituents’ hearts for a number of reasons, and like most right hon. and hon. Members I have had postbags full of correspondence from my constituents—not just in the last few weeks, but for many months.

I wholeheartedly support the motion and concur with many of the views that hon. Members have expressed today. We urgently need an investigation by the Financial Services Authority and the Office of Fair Trading. That is the will not only of hon. Members who have signed the motion, but of the public, so strongly do they feel. Oil companies and traders come up with all sorts of reasons why what hon. Members have said today is not true, and say that they are urban myths, but neither hon. Members nor the public are convinced by their arguments.

I should like to mention one or two unanswered questions that hon. Members have not mentioned. They mentioned the differential. In my constituency, which is probably one of the most urban county constituencies in the country, there is a differential of between 9p and 10p from one side to the other—a distance of five or six miles—which is astounding.

Twenty years ago, many of us chose to buy diesel cars because diesel was far cheaper than petrol. All of a sudden, the cost of diesel seems to have accelerated and outstripped the cost of petrol—on average, diesel is currently about 5p a litre more expensive. There must be a reason for that, and we need an answer.

I am short of time and have not mentioned most of the things I wanted to mention, but I implore the Minister to continue to pursue this issue. Please do not let the regulators off the hook, and please urge them to put a solution in place. We need a proper investigation—with teeth—that has an outcome for our constituents.

3.4 pm

Richard Fuller (Bedford) (Con): My hon. Friend the Member for Harlow (Robert Halfon) is the driver’s friend. For many years, people who drive cars doubted whether any Member of the House—particularly Labour Members—favoured what they did in their daily lives, so it must be a tremendous joy for them to have my hon. Friend in the House. He is not just the driver’s friend: as we have seen today, he is a friend of families on low incomes, of business, of growth, and of people who live in towns and the country alike. This issue affects us all, so I add my voice to his, and to those who have congratulated him on securing this debate.

Like my hon. Friend the Member for Rossendale and Darwen (Jake Berry), who mentioned his local newspaper, I would like to congratulate my local newspaper, Times and Citizen, in Bedfordshire, which has been running a

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campaign supporting fairer fuel prices in my local town since the beginning of this year. People are incredulous that local petrol prices can vary so much between communities. One of my constituents, Tipu Zaman, said:

“I travel to Stevenage every day and have not bought petrol in Bedford for around seven months. On the way there and back I pass about four or five petrol stations and all of them charge less than the stations in Bedford.”

How can that be true?

It is important to recognise that the campaign of my hon. Friend the Member for Harlow has already made progress by having the OFT start to look for evidence to support an investigation. There has been much speculation about the potential manipulation of the markets. I would be shocked if those markets had been rigged, but let us not forget that only a few months ago we were all shocked at allegations of rigging in the LIBOR market. To restore people’s trust in markets, it is important that the OFT investigates.

I ask the Minister to talk with his colleagues about another matter that my hon. Friend the Member for Warrington South (David Mowat) mentioned. The issue of competition has changed since 1998. One of the issues, seen in groceries as well, is a shift in power from retail choice to logistics strength—large supermarket chains using their logistics strength to move into new markets and reduce competition. That is an important issue for the OFT to investigate.

Finally, will the Minister also learn lessons from the US experience? The Federal Trade Commission writes on its website:

“Oil and gasoline are commodities that are critical to American consumers, so the Federal Trade Commission devotes significant resources to make sure that these markets remain competitive, using all the powers at its disposal to protect consumers from anticompetitive conduct”.

Will he ensure that the Government show that they understand the importance of this issue?

3.7 pm

Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op): It is a pleasure to take part in a debate on an issue that is important to motorists, families and businesses across the country, as the hon. Member for Bedford (Richard Fuller) just said. I congratulate the hon. Member for Harlow (Robert Halfon), who has worked assiduously on this issue and, as he said, built enough support across the House to get this debate through the Backbench Business Committee, and I congratulate the latter on allowing it to happen. I also welcome the Minister to his place. This is, I think, his first appearance at the Dispatch Box in his new role, although we have faced each other three times in a different capacity over the past week or so.

Families’ and businesses’ budgets are facing unprecedented pressures, as set out by the hon. Members for Harlow and for Bedford, but, as my hon. Friend the Member for East Lothian (Fiona O'Donnell) said, other issues, such as energy bills and rail fares, are also adding to them. As a result, people are struggling to keep their head above the water. The cost of fuel is one such pressure. As the hon. Member for Mid Norfolk (George Freeman) pointed out, that has an effect on the wider economy too.

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For all those reasons, the OFT’s decision to issue a call for information on the UK petrol and diesel sector is welcome. I pay tribute to the hon. Member for Harlow, because he made the point, as too did my hon. Friend the Member for Dumfries and Galloway (Mr Brown), that were it not for the continual representation here, we probably would not have got to that stage—it certainly was not the message the hon. Gentleman was getting from the OFT earlier in the year.

There is a sense that when the price of oil rises, the cost of fuel is not far behind, but when the price of oil falls, reductions in fuel costs do not appear to follow on so quickly. As the OFT said,

“pump price may be failing to rise and fall in a way that reflects the underlying movements in crude oil prices”.

That is at the centre of this debate and explains the level of concern expressed across the House.

As the hon. Member for Harlow detailed, the media reported this morning that a City whistleblower has alleged that the oil market is rigged with daily price manipulations. The hon. Member for Rossendale and Darwen (Jake Berry) made the point very well that the alleged manipulation, if true, would have had a much greater direct impact on our constituents than some other instances of manipulation that quite rightly caused concern. We need a fuel market that works in the interests of motorists, small businesses and local communities, but there are genuine concerns that that is not what we have.

The OFT’s announcement is welcome, although I note that it is not the announcement of an inquiry. As the hon. Member for High Peak (Andrew Bingham) made clear, what has been announced is a pre-inquiry inquiry, which probably should lead to inquiry, as I hope it will, because there is a good case for one. The OFT has committed to publishing a summary of its findings in 2013 and will outline the next steps at that point. As hon. Members will know, if a full inquiry is to be held, it may take many months if not years, with no firm conclusions necessarily reached until that point. We have to face the fact that there is a widespread feeling that in the meantime motorists will continue to get a raw deal and face mounting pressure at the pump.

The hon. Members for Camborne and Redruth (George Eustice) and for Warrington South (David Mowat) referred to the previous Transport Secretary saying that she wanted to look at tracking the price that oil companies pay and how the reductions are passed on at the pump. That is something she said in her previous role, but when the Library contacted the Department for Transport yesterday to see what progress had been made, it was advised that nothing would happen until the OFT had reported its findings at the very earliest. If an OFT inquiry does flow from the call for evidence, that could take a considerable time, so perhaps the Minister can enlighten us as to why the Department cannot do that work now. Indeed, I am not clear why that should be the case, because those issues could be tracked now. I therefore hope that the Minister will respond to that point, which is a matter of concern for Members in all parts of the House.

As the hon. Member for Belfast East (Naomi Long) and my hon. Friend the Member for Dumfries and Galloway made clear, along with many Government

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Members, those living in remote areas face particular pressures. By and large, prices in remote parts of the country are higher than in urban areas, as the OFT reports. There is also less choice, leading to less competition and difficult decisions being made. As my hon. Friend said, in some cases people may be deciding that it is not even worth going to work, because of the costs associated with making those journeys. Rural motorists often have far further to travel to fill up their tanks. High prices in remote areas also have a severe impact on the road haulage industry. The OFT noted the generally detrimental impact of high fuel costs on the standard of living in remote areas.

In November last year, the Chief Secretary to the Treasury announced a pilot scheme to cut the price of fuel for some of the UK’s island communities in the Northern and Western Isles of Scotland, to come into effect in March this year. Although that might be welcome—even though it came into effect 18 months after the Chief Secretary had said it would happen within a few months—towards the end of February, shortly before the scheme was to be introduced, the price at the pumps on Orkney and Shetland increased by 5p per litre. I know that the right hon. Member for Orkney and Shetland (Mr Carmichael) is unable to take part in these debates because of his Government position, but at the time he made it clear through his local newspapers that it was a strange coincidence that prices should go up shortly before the scheme was introduced. That adds weight to the concerns expressed about the possible level of manipulation. It is vital that the OFT gets to the bottom of that, because those concerns are deep-seated, particularly at a time of economic pressure for so many people.

The hon. Member for Brecon and Radnorshire (Roger Williams) made some points about independent retailers—I will not attempt to pronounce the name of the village where the filling station he referred to is. That is also an issue in urban areas, as I know from my constituency. Unlike the hon. Member for High Peak, I have not quite reached the point of taking my wife out to a petrol station—I am not sure I am that brave—but over a year ago I was contacted by an independent retailer operating in my constituency. The company’s main concern was that it was unable to compete with large supermarkets, which have the ability to use petrol prices as loss leaders and, further, manipulate prices in those areas. My hon. Friend the Member for Inverclyde (Mr McKenzie) made that point in relation to the situation in his constituency, as opposed to neighbouring constituencies, as did the hon. Member for Rossendale and Darwen.

A further complaint by that company was about the practices of oil firms and the impact on smaller retailers. That complaint has in large part been supported by the findings of the International Organisation of Securities Commissions, a body that has, as the OFT noted, highlighted many areas of concern, including the way in which oil prices are reported. The OFT expressed its concern that if oil prices are being inflated, that could be

“leading to higher pump prices because wholesale road fuels prices may be based on the prices reported by oil price reporting agencies.”

That is another important aspect of this debate.

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I am sorry to have to report that the local petrol retailer in my constituency that contacted me a year ago is no longer operating, and its situation is not unique. That is happening to many others as well. My constituency is largely urban and suburban, and the number of empty petrol retail outlets has increased massively. Some, ironically, are now being used as car-washes. There has also been a reduction in the opportunities available to people and an increase in the dominance of some of the big companies. All those factors underline the importance of making the case to the OFT that it needs to get to grips with this issue as quickly as possible. It must collect and analyse the evidence in order to make a decision on whether there should be a full inquiry.

Earlier this week, the president of the AA, Edmund King, expressed his concern about the high price of petrol at this time of year. He made the point that although increases are normally lower and pump prices come down at this time of year, we have seen an increase of about 10p since July even though there has been no appreciable increase in the price of oil. That is despite the Government’s introducing a fair fuel stabiliser. My reading of the Red Book tells me that it was introduced at a level of $75 a barrel equivalent. If that is correct, it has not made a difference, and the suggestion that the stabiliser was the answer to the problem has not been borne out. Perhaps this is because of other market manipulations that have been at the heart of the debate, and if so, that too lends weight to the case for the inquiry to happen as soon as possible. We need to get to the bottom of these issues, so that other Government interventions that could make a difference can be introduced rather than being offset by other changes and behaviours that are inherent in the market.

We have had an informed and interesting debate this afternoon. Members on both sides of the House have expressed the concerns raised by their constituents. This vital issue has a significant impact on their standard of living, and even on their ability to go about their daily business. The information in Members’ speeches showed the strength of feeling across the House. Motorists are feeling the squeeze. Families and businesses are feeling the pinch. That is why it is essential that any manipulation, collusion or shady practices in the market are properly exposed, and the OFT has a duty to get on and do that as soon as possible.

3.17 pm

The Minister of State, Department of Energy and Climate Change (Mr John Hayes): The House has long known that I am energy personified, and I am delighted that the Prime Minister has now recognised that fact and given me this important new role. I am equally delighted to speak on these matters from the Dispatch Box for the first time, although, as the shadow Minister, the hon. Member for Rutherglen and Hamilton West (Tom Greatrex), said, he and I have already met in debates in Westminster Hall and in Committee.

Several hon. Members have rightly paid tribute to my hon. Friend the Member for Harlow (Robert Halfon). My hon. Friends the Members for Bedford (Richard Fuller), for Nuneaton (Mr Jones) and for Camborne and Redruth (George Eustice) have all made the point that he has done the House a great service in allowing us to have an important debate on an important issue, which affects so many of our constituents.

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Fuel is of fundamental significance to consumers, and it is in our mutual interest to ensure that motorists and businesses are confident that they are being treated fairly and that, when the cost of crude oil comes down, reductions are passed on transparently and without unnecessary delay. This Government have eased the burden on motorists by £5.5 billion by not implementing the policies of the previous Government. I do not want to make this debate an unnecessarily partisan one—although my emphasis is on the word “unnecessarily”. The truth is that, had we put in place the previous Government’s plans, prices would be higher.

The shadow Minister pointed out, with typical decency, that we have also put in place the rural fuel duty rebate scheme, which is cutting the price of fuel in very remote communities by 5p a litre. The Government will continue to monitor the effectiveness of that scheme and, obviously, if there is more to say on that matter, I will come to the House and say it.

Hon. Members on both sides of the House have pointed out that the retail price of fuel is affected by a wide range of factors, including crude prices, tax and duty, the exchange rate, and the cost of refining and bringing the product to market. In the end, the effect on consumers is a profound one, and it is because I share the view of my hon. Friend the Member for Harlow and others that this is a matter of social justice that I am delighted that we shall have eased the burden on motorists by approximately £5.5 billion between 2011 and 2013. Average pump prices could be approximately 10p a litre lower than if we had implemented the previous Government’s so-called fuel duty escalator in 2011-12.

The petrol and diesel retail market in the UK is subject to the same legal constraints and the same framework governing competition and trading standards that relate to businesses in general. Price differences in different areas are likely to reflect local supply and demand, and may differ depending on fuel transportation costs and different retail business models, as my hon. Friend the Member for Bedford, among others, has said.

Oil prices rose this year owing to international developments such as uncertainty in the middle east and north Africa, and continued growth in demand. The Wheatley review and the International Organisation of Securities Commissions are looking at these matters, as the House will know. The House will also know that the UK works with the G20 to enhance transparency in the oil market, as recommended by many contributors to the debate. In the end, as my hon. Friend the Member for Warrington South (David Mowat) said, this is at least as much—and arguably more—about retail practice as it is about the oil industry. The oil price is, of course, set by global markets. The key causes of high prices this year are well understood.

Steve Baker (Wycombe) (Con): Many Members have talked about the volatility of oil prices and the functioning of the markets. There is a correlation between the volatility of oil prices and US Federal Reserve monetary policy. Before the end of Bretton Woods, there was hardly any volatility in the oil price; it has been introduced only subsequently. If there is a secular trend in oil prices at all—priced in, say, gold, which happens to be a scarce commodity—it is downwards. I do not think we are

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paying enough attention to the US exporting both inflation and volatility through US Federal Reserve monetary policy.

Mr Hayes: That is a typically incisive and insightful contribution from my hon. Friend. I will say a little more about volatility, but the House will have heard his argument. It seems to me to be as impressive as his arguments usually are, and I shall certainly give further consideration to the matter.

In the spirit of being open-minded—this is, of course, an immensely open-minded Government—let me mention the Wheatley review into LIBOR, which is considering whether benchmarks or indices in other markets also need to be looked at. It will, of course, include this market and it aims to publish its conclusions by the end of September. I look forward, too, to the recommendations from the International Organisation of Securities Commissions, and the Government will consider how to take those forward in the G20 and how to implement them in the UK to ensure oil price benchmarks are not open to manipulation. As a result of this debate, however, and of the arguments made by my hon. Friends and others, I will write to the Financial Services Authority about the concerns raised here today. There is no point in our having these sorts of debates if they do not inform and inspire Government policy. In the case of this Minister, they will do just that.

It is absolutely right that we enhance transparency in the oil and commodity markets. The Government continue work to improve the functioning of the global market and to reduce price volatility through engaging with key oil-producing countries to promote investment in oil production and responsible behaviour in the market—the matter raised by my hon. Friend the Member for Wycombe (Steve Baker) a few moments ago. To that end, we have also championed a new charter for the International Energy Forum, and we will continue to monitor closely the impact of initiatives being taken in several other G20 countries, including Germany and Austria, to improve fuel price transparency.

Demand is another issue, and reducing the UK’s long-term dependency on oil and petroleum products is a Government priority. This includes developing ultra-low-carbon vehicles, high-speed rail networks and renewable heat incentives. We are working within the G20 to reduce oil demand globally—for example, through the work to reduce fossil fuel subsidies. At the same time, it is important to ensure that the market is well supplied, and we are working with the International Energy Agency, including on post-Libya stock release.

The Office of Fair Trading call for evidence is central to our considerations today. I encourage all Members to submit evidence to the OFT, and I know that many who have spoken in the debate will do just that. Of course we must not intervene until that call for evidence is complete. My Department believes that changes in the price of crude are indeed passed on to the pumps, although, as is clear from the data, there is a considerable time lag. There is certainly a case for greater transparency, about which, as my hon. Friend the Member for Harlow will know, the OFT has specifically asked for evidence.

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In summary—this is not my final summary, Mr Deputy Speaker, but merely my preliminary summary: I did not want to dampen the enthusiasm with which my speech was being met—I strongly welcome the OFT’s decision to call for more information about the way in which the petrol retail market works.

As has been said, the OFT has said that it will consider whether reductions in the price of crude oil are being reflected in falling pump prices; whether the practices of supermarkets, which have been mentioned by a number of Members today, and major oil companies may be making it more difficult for independent retailers to compete with them—I shall say more about that in a moment; whether there is a lack of competition between fuel retailers in some remote communities in the UK; and whether the concern about price co-ordination and the structure of road fuels markets that has been expressed by other national competition authorities is relevant in the UK. That is a first step, and reflects the fact that, to date—as was pointed out by my hon. Friend the Member for Warrington South—no clear evidence has yet been provided to demonstrate that there is reason for concern about competition in the market. Nevertheless, the inquiry is welcome: I want to make that absolutely clear.

I ask my hon. Friend the Member for Harlow, and other Members with an interest in the subject, to engage with the OFT’s study—I have no doubt that my hon. Friend was going to do so anyway, but I wanted to place that on the record—and to participate fully, as my Department will: I commit myself today to ensuring that that happens. What is important at this stage is for Members or their constituents who have evidence relevant to the scope of the OFT's call for information to make it available before 17 October.

As I have said, my Department’s analysis shows that changes in the wholesale price of crude, both increases and decreases, are passed on, but I shall nevertheless ask my officials to look at the matter again and revisit their analysis, as a direct result of the debate and my hon. Friend’s wider contribution to discussions on this subject.

The important issue of what might be called “fuel deserts” was also raised today. The OFT is seeking evidence relating to the decline in the number of independent petrol stations and the rise of hypermarkets. That too has been mentioned by a number of Members, including my hon. Friend the Member for Warrington South and my hon. Friend the Member for Bedford. The Government have taken tough action in the past to address the potential of local monopolies. For example, this summer, following an OFT investigation, Shell gave undertakings to sell a number of its petrol stations because of concerns of this kind.

Some Members mentioned the problems of rurality. The hon. Member for Inverclyde (Mr McKenzie) and my hon. Friend the Member for Camborne and Redruth (George Eustice) represent rural constituencies, and I am quite deeply affected by the problems myself. I know from my own experience in Lincolnshire that rural communities can be disadvantaged when the number of petrol retailers falls and journeys to obtain petrol and diesel become longer. I will also ask my officials to look at the relationship between storage capacity and the declining number of retailers; the picture is mixed because of the size of tanks that are kept in different places, but I am interested in the issue.

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Independent petrol stations are often located in more rural areas, and can provide a valuable service for local communities. As was mentioned by the hon. Member for Rutherglen and Hamilton West (Tom Greatrex), there is concern about the effect on rural resilience in the event of further closures of such petrol stations. As I said earlier, the OFT has signalled that it is seeking evidence relating to the decline in the number of independent petrol stations and the rise of the hypermarket retailers, to which the hon. Gentleman and others referred. I particularly thank my hon. Friend the Member for High Peak (Andrew Bingham) for emphasising the effect that that has on his constituents. I must make it clear again that the Government have not been reluctant to take action in the past, and would be happy to do so again if the evidence legitimised such action.

Earlier this year, my Department commissioned a study of the retail market for road fuels, to develop further our evidence base on the size and shape of the market and our knowledge of the impact of the structural change to the market over recent years. I will write to interested Members with details of the findings in due course and share them with the OFT. That is what it says in my script, but I will do more than that: I will write to all Members of the House, because I know that all Members are interested in these matters. We will keep the whole House fully informed of the steps the Government are taking.

As a result of the arguments my hon. Friend the Member for Harlow has made today, I will also instruct my officials to ensure that this study should include detailed analysis of how far people have to travel to reach their nearest petrol station, and how this has changed over time. He may count that as a significant victory for him and a tribute to the work he has done.

In conclusion—

Tom Greatrex rose

Mr Hayes: Before moving to my exciting peroration, I shall happily give way to the hon. Gentleman.

Tom Greatrex: While the Minister is in the mood to instruct his officials to do various things in response to this debate, may I reiterate my point about the work the previous Transport Secretary said would happen, but which it appears the Department is now saying will not happen until after an OFT inquiry? Will the Minister look into that, and see whether it could happen sooner rather than later?

Mr Hayes: I thought that was the best point among many that the shadow Minister made in his speech. The OFT plans to report in January 2013. As the hon. Gentleman knows, it is looking specifically at the issue of transparency, and we want to feed its findings into our work. I will certainly take a look at the timing issue he describes, however, to make sure we are acting in a coherent and consistent way.

Mr MacNeil rose

Mr Hayes: I shall give way, but these interventions are slightly Wagnerian, as they serve to add to the expectation in advance of my exciting peroration.

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Mr MacNeil: I am grateful to the hon. Gentleman. Will he consider increasing the rural fuel derogation and extending the rural areas that are covered by it, not only in Scotland but in Wales and England?

Mr Hayes: Given what I have said about my credentials in respect of rurality, the hon. Gentleman can be absolutely convinced that my concern for rural areas in England, Scotland and the rest of our United Kingdom will be at the very heart of all I do.

I again thank my hon. Friend the Member for Harlow for securing this debate, and in response to his three core points I say the following. First, petrol prices are high, but had we implemented the previous Government’s policies, they could have been 10p per litre higher, and we have taken location-specific action through the rural duty rebate scheme.

Secondly, DECC analysis shows that changes in the price of crude are passed on at the pump—although there is a significant time delay. The Government are keen to establish whether there is evidence to the contrary, however, and we will revisit our analysis. The OFT will also look at this, and I encourage those with evidence to give to submit it before the due date.

Thirdly, price transparency is important to build consumer confidence. In the call for information, the OFT noted that DECC and the Department for Transport have been in discussions with the fuel industry on possible ways to improve information on fuel prices, and we have agreed to await publication of the OFT’s findings before taking further steps. Let there be no mistake, however: I shall make sure that coherence informs our approach to that cross-departmental work.

The Government take seriously the potential for manipulation of reported price benchmarks and look forward to the International Organisation of Securities Commissions recommendations. We will consider how to take them forward in the G20 and how to implement them in the UK, to ensure that oil price benchmarks are not open to manipulation. As I have said, I will write to the Financial Services Authority to express Members’ concerns. I encourage my hon. Friend and others in this House to work constructively with the OFT and await the result of its call for information. As has been said, at this stage the OFT has not ruled out a more detailed market study. This first step of the call for information will enable the OFT to take a view on potential market concerns and the need for further work. The OFT will publish early next year, alongside recommendations for action by others to support fair and open competition in the market.

Let me end by saying that energy is vital for growth, as fuel provides the power for our economy. However, this is also about the effect on consumers—it is indeed about social justice. In my job, as the people’s Minister from the people’s party—the party of Wilberforce, Shaftesbury and Disraeli—the people’s concerns for social justice will motivate, inspire and inform all I do, in this matter and in others.

3.36 pm

Martin Vickers (Cleethorpes) (Con): I am not sure whether I can match the excitement generated by the Minister but, in concluding this debate, I, too, join in the congratulations to my hon. Friend the Member for

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Harlow (Robert Halfon), who has certainly made his name—he is now known nationwide as “Mr Fair Fuel”. It is a pleasure to serve as his deputy on the all-party group on fair fuel for motorists and hauliers.

This has been a good debate, with every speaker highlighting the impact on their constituents. Without doubt, the cost of living is, along with the other economic issues of jobs and growth, the No. 1 concern of our constituents. There is a widespread view that the tax and duty on petrol is way too high, and that it is unfair, particularly as it falls disproportionately on hard-working families, especially in rural areas, as has frequently been mentioned. People know that the Government are particularly keen to help and support them and, having heard the Minister’s comments, I am confident that that is the case. As my hon. Friend the Member for Camborne and Redruth (George Eustice) and others have said, the Government are particularly alert to the problems affecting hard-working families. It has been said numerous times but it cannot be said too often that petrol is 10p a litre cheaper now than it would have been had the Chancellor not acted.

It is worth mentioning that in my constituency many hundreds of people work in the oil industry at the refineries in Immingham and along the Humber bank, and the industry is vital to the local economy. Nevertheless, the public remain understandably cynical about, and suspicious of, what they see: vast profits; volatility in markets; and the results of falls in oil prices not being quite as dramatic as those of increases. My hon. Friend the Member for Rossendale and Darwen (Jake Berry) referred to a broken market, and my constituents, who live within walking distance of a refinery and often find that they get a better deal by driving many miles to save a few pence a litre, can testify to that.

It is a long time—14 years, I believe—since the OFT last investigated the sector, and I thank the Petrol Retailers Association for bringing that to my attention. Clearly, another investigation is urgently needed. As my hon. Friend the Member for Harlow has pointed out on a number of occasions, other G20 nations are taking regulatory action and we need to ask ourselves why we are so far behind. While we push for a full investigation, I also want to give my support to the call for evidence. I encourage, as the Minister did, all Members to submit evidence.

Our constituents rightly expect the discrepancies in costs that flow from oilfields and platforms to be immediately reflected at the pump. While we are seeking the how and why, what should concern us more than anything—we have heard evidence of this in the debate—is the burden that this cost places on the average person and on the average business, and on their ability to contribute positively to the economy.

Jason McCartney: As one of the signatories to the motion, I praise my hon. Friend the Member for Harlow (Robert Halfon) for securing the debate. Does my hon.

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Friend the Member for Cleethorpes (Martin Vickers) agree with me, and with many of our fair fuel and petrol price campaigners, that Governments can do nothing more at the moment to help hard-pressed families, commuters and small businesses than cutting fuel duty and that oil companies can do nothing more to support our economy at this tough time than acting fairly and transparently in the way they price their products?

Martin Vickers: I agree entirely. My hon. Friend, as always, gets right to the heart of the matter.

My hon. Friend the Member for Mid Norfolk (George Freeman) gave a particularly good analysis of the impact on rural economies. As other hon. Members have said, many of our constituents in rural areas now have to drive much further to fill up as a result of the drastic reduction in the number of petrol forecourts, particularly in the independent sector. It is worth pointing out that we should not blame the independent operators. They are local businessmen seeking to make a decent living. These fuel prices are affecting the average person every day of their lives in a negative way. The more that goes in tax, the less there is to spend and boost the local economy. I was pleased to hear the Minister speak about being robust and that he is not reluctant to take further action and would be prepared to revisit the many issues raised if new evidence is brought forward, which is encouraging.

We have had an exceptionally good debate. The root cause of the problem might be market manipulation, and it might not. Despite allegations one way or the other, our constituents deserve the real answers. In summary, I fully support the OFT’s moves so far but believe that, along with the FSA, a full, independent and transparent investigation is needed. As I have said, the unfair price of fuel at the pumps is not the fault of the independent forecourts, which have seen high rates of closure over the years; it is possibly the outcome of price fixing by the people involved in the oil market. Our country cannot survive these continued price hikes. They damage individuals and business. It is good to see cross-party support for the motion.

Question put and agreed to.


That this House notes the call for evidence by the Office of Fair Trading (OFT) on competition in the UK petrol and diesel market; however, believes that the OFT and Financial Services Authority should launch a full investigation into oil firms active in the UK; calls on the Government to consider the emergency steps being taken in other G20 countries to reduce fuel prices; notes, for example, the announcement by President Obama to strengthen federal supervision of the US oil market and to increase penalties for market manipulation, and the move by Germany and Austria to establish a new oil regulator with a remit to help stabilise the price of petrol in those countries; and further urges the OFT to note that the Federal Cartel Office in Germany is now investigating oil firms who are active in the UK following allegations of price fixing.

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Tax Avoidance and Evasion

3.42 pm

Mr Michael Meacher (Oldham West and Royton) (Lab): I beg to move,

That this House has considered the matter of tax avoidance and tax evasion.

I would first like to thank very sincerely the Backbench Business Committee for giving me the opportunity to raise this issue for debate. Tax avoidance and evasion is a cancer in Britain’s society today. The Prime Minister was right to condemn it as morally wrong and the Chancellor was right to condemn it as morally repugnant. The problem is that the Government’s actions to deal with it have been feeble and do not match those words, if indeed they are not downright evasive, as I shall show.

The extent of tax avoidance and evasion is much disputed, but even the Government admit that, along with uncollected taxes, it reached £42 billion a year in 2009, which is equal to one third of the entire UK budget deficit. Spread over the past six years, it amounted to £228 billion. The Tax Justice Network believes that the true figure might be up to three times higher. For the purposes of this debate and this argument, let us accept the Government’s figure at the moment—it is certainly big enough.

Steve Baker (Wycombe) (Con): Will the right hon. Gentleman give way?

Mr Meacher: I am always ready to give way to the hon. Gentleman on these issues.

Steve Baker: I congratulate the right hon. Gentleman on securing the debate; it was an honour to join him in bidding for it.

I wanted to check where the right hon. Gentleman was getting his figures from. I am looking at the 2011 tax gap document from Her Majesty’s Revenue and Customs. It gives a figure of £35 billion for 2009-10. Where did he get the figure of £42 billion from?

Mr Meacher: I got it from the same source. I thought that the figure for 2008-09 was £42 billion. I shall write to the hon. Gentleman later. The average over the period is, I think, £38 billion and I am sure that the level reached £42 billion.

The Exchequer Secretary to the Treasury (Mr David Gauke): To be helpful, I should say that I think the right hon. Gentleman is citing the 2008-09 number, while my hon. Friend is citing the 2009-10 number.

Mr Meacher: I thank the Minister for that helpful intervention. Once again, I find myself at one with the hon. Member for Wycombe (Steve Baker).

The haemorrhaging of tax revenues on the scale that I have described matters a great deal. First, and obviously, it is deeply unjust because tax avoidance and evasion are heavily concentrated among the big corporations and the mega-rich. If they pay hugely less than their real liabilities, that must mean that, for any given expenditure, those on average and low incomes have to pay more. That is always unjust, but it is particularly unjust at a time of prolonged austerity.

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Secondly, there is the obvious point that if tax avoidance were cut sharply, many of the Government’s cuts in public spending and benefits would not be necessary and, I think, could not be justified. Thirdly, the tax avoidance industry—I do not exaggerate in saying that it is a parasite on the body politic—would be rendered largely obsolete.

The fact that City lawyers and accountants are paid vast sums to get round and neutralise what Parliament plainly intended in its Finance Bills is an open sore that would infect any democratic and fair society. The fact that they are allowed to do it makes monkeys of the Government. The fourth, and very important, point is that if most tax avoidance were stopped—I realise that it will never stop completely—companies would be forced to compete not on the basis of who was best at abusing tax law but on the quality of their goods and services. The benefit for the British economy would be substantial.

What has been the Government’s response? Tomorrow is the last day of the Government’s consultation on what they call their general anti-abuse rule, or GAAR, for tax. The background to that repays some examination. The Government commissioned the Aaronson group—Graham Aaronson is a prominent lawyer—to advise on the construction of such a rule. The group reported last November, I think. Extraordinarily, the report states right at the start that a broad anti-tax-avoidance rule is not necessary or desirable; it should apply only in the most extreme cases, so that for the overwhelming majority of cases circumventing taxes should continue as before.  

I should point out that Aaronson has only ever represented companies or persons against HMRC; he has always acted pro the tax avoidance industry and never pro tax. Appointing him is rather like putting a poacher in charge of the grouse moors. Aaronson chose as his adviser Lord Hoffman, the man who killed the Ramsay principle—the general anti-tax-avoidance principle, or GANTIP—in the Westmoreland Investments case in 2001. The Government’s two key advisers on anti-tax-avoidance measures were carefully chosen in the sure knowledge that they would never recommend any such action. Thus, of course, it has proved. The Aaronson report recommended that if a general anti-abuse rule were accepted at all, Her Majesty’s Revenue and Customs should be obliged to consult and get the approval of a tribunal before it could be used against any particular person or company. In other words, the Government’s official tax collection agency should have to get permission from an external body before it could exercise its legal powers. That is an extraordinary proposal. However, it gets worse. The Aaronson group proposed that the tribunal should have three members—fair enough—of whom two should be from the tax avoidance industry. That makes it an open and shut case: the general anti-abuse rule will certainly gather dust on the shelf.

Caroline Lucas (Brighton, Pavilion) (Green): The right hon. Gentleman is making a compelling case to suggest that the Government are not fully enthused about this kind of idea. Will he give me a sense of where his Front Benchers stand on the matter? I absolutely support his views, but I would love to know whether they are behind him.

Mr Meacher: We have our representative on the Front Bench who will speak about that, but I will come to what I think should be done.

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The Government have said that they will accept the Aaronson proposals in full—what a surprise! So the Prime Minister’s boast that he was cracking down on aggressive tax avoidance turns out to be nothing more than a paper aeroplane job devised in the certain knowledge that it will never fly.

After this tragic-comic charade, what will Government’s Bill, scheduled for next year, achieve? If it is used at all, other than as a fig leaf to cover the Chancellor’s nakedness on this issue, I think that it will be drawn extremely narrowly to include only the most egregious and extreme cases of tax abuse. It will exclude national insurance and VAT, which are a pretty large part of the tax system, and will not even regard the shifting of income, profit or gain from one tax category to another in order to gain a tax advantage as being within the definition of tax avoidance. I ask you, Mr Deputy Speaker! Indeed, the fact that the Government’s own economic impact assessment for the proposed general anti-abuse rule states that it will have little or no measurable impact makes it absolutely clear that the anti-abuse rule is just a massive white elephant.

Anas Sarwar (Glasgow Central) (Lab): I congratulate my right hon. Friend on securing this important debate. He is rightly making a powerful case about tax avoidance in the UK, but does he recognise that it is also a global problem? Recent OECD statistics show that the amount of tax avoidance that takes place in developing countries is three times as much as the global aid budget, and the Government’s recent legislation on controlled foreign companies makes it easier for companies to avoid paying tax in developing countries.

Mr Meacher: I agree. That is a question to which the Minister should reply. What concerns me is that this Government, out of those in all the western countries, particularly those in the EU and the OECD, have been dragging their feet the most on this issue.

Why are the Government introducing this measure? That can only be a matter of conjecture, but I suspect, as does the Association of Revenue and Customs, which represents senior officials at HMRC, that its real purpose is to stop almost nothing while allowing the vast amount of tax avoidance that it will never address to be deemed ethically and technically acceptable when of course it is nothing of the kind—in other words, to move the goalposts even further towards expanding the boundaries of so-called legitimate tax avoidance. I hope that the Minister will convince me and the House that that is not so, but that is certainly how many people read it.

Turning to the point raised by the hon. Member for Brighton, Pavilion (Caroline Lucas), what should be done in place of this mealy-mouthed Government measure? First and foremost, we need a general anti-tax avoidance principle—GANTIP—enshrined in statute. That would allow HMRC to declare null and void any scheme whose primary purpose was an artificial contrivance to avoid tax rather than to act as a genuine economic transaction. I think that most people in this country would agree that that is an extremely fair and reasonable proposition.

That is exactly what my private Member’s Bill, the General Anti Tax-Avoidance Principle Bill, would do. It is due to receive its Second Reading tomorrow and I

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expect the Government Whips to give it a fair run. It was prepared and drafted by Richard Murphy, one of the founding members of the Tax Justice Network and, I can say without any exaggeration, one of the country’s leading tax accountants. It would overturn the rule in the so-called Duke of Westminster case in 1936, which has underpinned the tax avoidance activities of the accounting, legal and banking professions ever since for three quarters of a century. In effect, there is an economic test at the core of my Bill that can be applied if, having taken into account all the relevant circumstances relating to the economic substance of a transaction, it appears that tax is not being paid by the right person, in the right amount, in the right place, at the right time, or at all

GANTIP is crucial, but other measures are also needed and I will address them briefly. The Government should seek an international financial standard that requires country-by-country reporting by transnational corporations in order to block the immense loophole of transfer pricing. The European Union savings tax directive, which the UK Government have repeatedly tried to water down, should be strengthened to include offshore trusts, which are a favourite tool of the tax-cheating industry. The non-dom rule was introduced in 1799—it is somewhat anachronistic—and the UK is now the only country in the world, apart from Ireland, I think, that does not tax worldwide earnings. It should be abolished.

A much tougher line should be taken on closing down UK tax havens. The UK Crown dependencies hold some $7 trillion of US bank deposits and probably dodge some £30 billion of tax. The Cayman Islands have just 30,000 inhabitants, but they are home to 457,000 shell companies. We should adopt the rule that unless such territories provide full and automatic information on all such funds that can be taxed, any transactions with such tax havens should be declared illegal.

In conclusion, I do not often agree with the Prime Minister and the Chancellor, but tax avoidance is morally wrong and morally repugnant. It is high time that we had in this country a Government whose actions show that they actually believe and support that.

Several hon. Members rose

Mr Deputy Speaker (Mr Lindsay Hoyle): I am going to introduce a 10-minute limit, so we should get everybody in.

3.58 pm

Steve Baker (Wycombe) (Con): I congratulate the right hon. Member for Oldham West and Royton (Mr Meacher) on securing this debate. He has introduced it with the highest standards and in the finest traditions of the House. I know that he feels he is on the moral high ground, and in many ways he is. I hope that the whole House will join me in wishing him the speediest of recoveries from his injuries.

On evasion, Parliament is absolutely entitled to expect the law to be obeyed and its will must be expressed in law. If people are able to behave lawfully but other than in accordance with the spirit of the House, the law should be changed, which is a point that my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg) has made on numerous occasions. I am

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prepared to accept the possibility that I am the only Member who does not know the tax code from one end to the other. I see that you are nodding, Mr Deputy Speaker, so perhaps I am alone in that regard.

About 12 years ago, when I worked as a software engineer servicing HMRC, I recall setting up electronic checking for certain pay-as-you-earn, end-of-year returns. It simply was not possible to submit a valid expenses and benefits return in 2001. We had to go to some lengths to persuade HMRC that it had to change its rules if it was to have an internally valid submission. Since then, the tax code has lengthened infamously. I may be alone in not understanding the tax code, but it appears that in some instances, HMRC has not understood it either.

My first point is that Parliament’s will must be expressed clearly in the law and that people should obey it. I object to the most complex tax avoidance schemes for two reasons. First, as was set out by the right hon. Member for Oldham West and Royton, if people are setting up sophisticated schemes to avoid the clearly expressed will of Parliament, they are shifting the tax burden on to others who are less able to pay. I agree with him about that.

My second reason was not given by the right hon. Gentleman. My most profound objection is that people quit the moral high ground when they engage in such schemes. They make it more difficult for those of us who believe that low taxes are in the general interest to make our case. They open the door to another industry—not merely the tax avoidance industry—that uses the complexity in our tax system, its opaqueness and its openness to various interpretations to construct a case that discredits not only our tax system, but the rule of law. For those two reasons, I object to the sophisticated schemes that we all know so well.

I will move on to the scale and the breakdown of the tax gap. We had an exchange earlier about the figures. The total tax gap in 2009-10 was £35 billion. Of that, £5 billion or 14% was due to avoidance and £2 billion due to error. The remaining categories were broadly equal. Criminal attacks, evasion and the hidden economy all involve breaches of the law and ought to be pursued in the usual way. I am grateful to the Minister for acknowledging that. The other three categories were a failure to take reasonable care at £4 billion; non-payment, which includes insolvency, at £4 billion; and legal interpretation at £5 billion. Although those figures sound large, we need to bear it in mind that avoidance and legal interpretation, which is a potential source of avoidance, make up £10 billion of the total of £35 billion stated by HMRC.

Caroline Lucas: I share the hon. Gentleman’s opposition to the level of tax evasion and avoidance. Does he agree that it is therefore regrettable that his Government are cutting the number of people working at HMRC by about 7,000? The very people who could be chasing after tax avoidance and evasion are being sacked by his Government and we therefore do not have the resources to go after it. Is that not the worst kind of false economy?

Steve Baker: To return to my earlier remarks, having serviced HMRC as a technical consultant on and off for a very long time, I could give the hon. Lady lengthy

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examples of enormous waste, partly through people not being given adequate skills. I will not bore her with the technical details, but a job that I could have done in about two days with software was going to be done over the course of six months by a team of 20. That kind of nonsense has to stop. They were doing something by hand that ought to have been done using software. The level of work that people were doing was almost degrading. People must be upskilled so that such nonsense can be brought to an end. I therefore support the Government in their drive to increase efficiency at HMRC.

We all know why tax avoidance happens: people desire to pay less tax. The Government know that. Through forms of tax avoidance that are barely worthy of the name, such as individual savings accounts and pensions, the Government have always deliberately incentivised certain behaviours by creating tax breaks. That is not really the subject of the debate. I mention it only to demonstrate that we all understand that everybody would like to pay less tax. I would be grateful if the Minister confirmed for anybody who is watching, listening to or reading this debate by what mechanism they can make voluntary payments to the Treasury, not because I wish to make one, but because I think that it ought to be established how one could make a voluntary payment if one so wished.

The heart of this debate is the question of altruism. My feeling is that Members of all parties often feel that people constructing sophisticated avoidance schemes are insufficiently altruistic. There is a wide range of perspectives on that. Rarely in this country do we hear the cry, “All tax is theft”, but at one extreme there is the rather childish hysteria of objectivism, which totally rejects all altruism, and at the other there is the altruism of the state collective.

As it happens, I believe that having the state collective as the basis of all altruism is extremely dangerous. I am a great believer in individual altruism, so I say to the wealthy that they should not only pay their taxes as Parliament intends but be altruistic and engage in philanthropy wherever they can. Let us win the moral high ground for lower taxes so that people can give more voluntarily and demonstrate that voluntary individual altruism is a better basis for society than coercion. I believe that liberty is the proper context for all virtue. There is very little virtue in obedience to an inescapable authority or in simply submitting to the pay-as-you-earn tax system, but there is a great deal of virtue in someone making their fortune and choosing to give it away.

There seems to be a suggestion inherent in the debate that people who are wealthy have in some sense done something wrong. If somebody in business has at every step created value for other people without force or fraud, they are justly wealthy. If people believe that wealth has been obtained by criminal acts of force or fraud, criminal prosecutions should be pursued. If people are wealthy because they have made a just profit and created value for society, they should be applauded. If we are to have a free, just and prosperous society, we must reconcile ourselves to the notion that profit is a social good.

An enormous amount of damage is done by misinformation. The Tax Justice Network, which was mentioned earlier, has been discredited in another report,

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and we could go to and fro arguing about who is right and who is wrong, but it is important that people do not discredit the tax system unnecessarily.

My next point is about the rule of law and the general anti-avoidance rule. I initially ranted about that to the Attorney-General, and he related a case—I cannot recall which right now—indicating that there is a long-standing tradition of HMRC being able to interpret the law in a particular way in order to apply Parliament’s will. I am extremely sceptical of anything that allows the law to be applied retrospectively so that people cannot predict how their actions will be interpreted.

Having visited sub-Saharan Africa, Egypt and Pakistan since my election, I am absolutely convinced that the primary reason for poverty in those places is that they lack the rule of law. We interfere with the rule of law at our peril, and if we are really serious about the prosperity of the poorest, we must ensure that it continues to be possible in our country to invest capital productively to raise real wages. That requires certainty and the rule of law.

What, then, is to be done? I will not even be able to attempt in one minute and 50 seconds to enter into evidence the 2020 Tax Commission’s report on the single income tax, but I encourage the Minister to proceed with radical tax simplification. I believe that much of what we are discussing could be dealt with if taxes were both simpler and lower. At this stage, with the mess that we have been handed, it seems to me that there is no chance of low taxes before the election. I would be astonished if the Government were able to deliver them. However, I encourage them to do everything possible to simplify taxes so that they can be applied equally to all and we can end the discrediting of the law and Parliament that happens when people engage in schemes that are obviously mendacious. I am grateful to the right hon. Member for Oldham West and Royton for securing the debate and hope that we will have a productive exchange of views.

4.9 pm

Margaret Hodge (Barking) (Lab): I, too, congratulate my right hon. Friend the Member for Oldham West and Royton (Mr Meacher) on securing the debate. I welcome the growing public interest in these issues, which is perhaps not reflected in the attendance in the Chamber on a Thursday afternoon. An issue that is sometimes seen as dry and complex and often portrayed as too difficult or obscure for people to get their heads around is now accepted as a matter of great public interest. I welcome the determination of the media in that regard, particularly that of The Times, which has done a good job of investigating the issues and identifying and exposing what is becoming a plethora of tax avoidance schemes that persist in the UK.

Hard-working British families, who have had to cope with a cut in their living standards and less money in their pockets because of the state of the economy and who pay their proper contribution in tax to fund all our collective endeavours and ensure that we have the public services and infrastructure on which we all depend, are rightly angry when they see a small elite in Britain—wealthy individuals and profitable large corporations—avoiding

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tax and putting so much time, energy and money into finding ways to avoid making their proper contribution. It is a terrible sickness at the heart of our society that too many well-heeled individuals and profitable corporations simply do not accept that they, too, have a duty, coming from their legitimate wealth, to contribute according to their means to the society from which they expect to take according to their needs and their expectations. Too many rich individuals and profitable companies see tax avoidance as clever, cool and worthy of praise and admiration, whereas it is immoral and wrong.

If we are to maintain public confidence in the tax system, it is vital that everyone knows and sees that it is fair, with everyone paying their fair and proper share to the collective purse. Tax avoidance and evasion are important because huge sums are involved. We have had the HMRC estimates and I have seen a Tax Research UK estimate that puts the tax gap at £120 billion. Whichever argument we believe, we are talking about many, many billions. A quarter of that sum is down to tax avoidance and evasion, but we should also have regard to the fact that the Government, in figures published last year, admitted writing off nearly £11 billion of tax that HMRC called “uncollectable”.

When the Select Committee on Public Administration considered how HMRC handled the large tax disputes with major corporations, we found that up to a potential £25 billion of moneys were outstanding to the Exchequer, although I accept that that figure is not precise. That is a huge sum and we need to set it against the cuts the Government have chosen to implement, such as the £24 billion per annum cuts in benefits, tax credits and pensions that hit the most vulnerable in our society.

The PAC considered a range of tax avoidance issues, including how HMRC handles disputes with large companies, the use of personal service companies and how those who engage in business with and make their money out of the public sector arrange their affairs to avoid tax. This autumn, we will receive a report from the National Audit Office on the tax avoidance schemes exploited by wealthy individuals exposed by The Times, which found that wealthy people were too often paying as little as 1% of their income on tax arrangements—for example, the K2 scheme used by people such as Jimmy Carr.

Based on that work, I want to focus on four points on which I think that the Government can take practical steps to tackle and stop avoidance and evasion. First, greater transparency is vital. We know so little and people get away with so much because the principle of taxpayer confidentiality is used and, in some cases, abused to prevent proper accountability to the public by the tax authorities. We uncovered the scandal surrounding the Goldman Sachs settlement because of the brave and determined efforts of one whistleblower. Questions surrounding other deals remain, such as, in the case of the Vodafone deal, whether the amount finally paid was correct and whether it was right for the company to be given extra time to pay. The Government should consider full transparency on the tax negotiations for the FTSE 100 companies. They are publicly quoted companies that publish their accounts, and we know from their accounts how much they pay, so we should also be able to monitor how settlements are reached and why the amounts are determined. People advising those companies

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use knowledge gained from negotiating one deal to get a better settlement for other clients. The public should also have that knowledge, so that they can consider whether avoidance exists.

Simon Hughes (Bermondsey and Old Southwark) (LD): I agree with the right hon. Lady and I thank her and members of her Committee for their diligent work. First, have they considered looking at countries that have a full transparency regime for publicly quoted companies? Secondly, will they ensure that no company that does business with the Government can use offshore tax havens in any part of its ownership arrangements? That is currently very common, particularly among public utilities such as water companies and others that supply key, nationally important infrastructure.

Margaret Hodge: The Committee tries to look at international comparators, but it does not do enough such work. The right hon. Gentleman’s second point was to be one of my suggestions to the Government, and I agree with him entirely. My final point on transparency is that there is a belief in the country at large that bigger companies are not treated in the same way as small and medium-sized enterprises, which are struggling and often pursued relentlessly by Her Majesty’s Revenue and Customs. That belief will be shattered or broken only if we have full transparency and people can see that there are no sweetheart deals.

My second point concerns the proper resourcing of HMRC to tackle avoidance and evasion. Of course we want more efficiency from everyone employed at HMRC. The Labour Government cut 3,000 jobs, but I think that was wrong because evidence shows that for every £1 invested in pursuing tax avoidance, £10 is raised from the money collected. We should, therefore, be sensible about how we cut the deficit and we should invest in those areas where we will get money back.

I say to the Minister that it is worrying to see the threshold at which HMRC intends to pursue fraud actions raised because it does not have enough legal resources. It is also worrying that the extra money released by the Government in the spending review is not currently being used because HMRC cannot work out the training programmes that are required to get individuals up to speed for work on tax avoidance and evasion.

John Pugh (Southport) (LD): One of the reports considered by the right hon. Lady’s Committee contained an acknowledgment by the Treasury that £1.1 billion was lost as a result of premature staff reductions. A report by the National Audit Office gives the figure of £1.1 billion losses to HMRC as a result of accelerating the cuts.

Margaret Hodge: I accept that entirely and it was not a sensible way of proceeding. I also want to mention the quality of staff in HMRC. When we carried out the Goldman Sachs review, it was worrying to find that so few people at the heart of HMRC who were engaged in those negotiations had what was called a “deep knowledge” of tax. They were up against highly skilled, knowledgeable and experienced—and highly paid—people, who were advising companies and high-wealth individuals. We must look at both quality and quantity of staff.

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My third point is about the outrage caused by people whose income comes out of our taxes, but who fail to make their rightful contribution. I applaud the way the Government responded to the disclosure that some civil servants have personal services companies, and I hope that their work, and the work done by the Committee to support the report on that, will ensure that such practices no longer exist within the civil service. Evidence from the BBC, however, was shocking. Some 25,000 people working for the BBC are on off-payroll contracts, including 13,000 so-called “talent individuals” who appear on our television screens or on the radio. That is not an acceptable practice—goodness knows how it evolved—and I urge the Minister to take action on that and in local government where personal service companies still exist. I should tell the Minister that, in 2010-11, HMRC investigated only 23 cases of potential abuse of the use of the personal service company vehicle, which was down from 1,000 such cases in 2003-04. There is a resources and priorities issue within HMRC. Those people should set an example and show leadership in the fight against tax avoidance, and we should be able to see that they are doing so.

Equally—this point was raised by the right hon. Member for Bermondsey and Old Southwark (Simon Hughes)—companies that benefit from public expenditure and provide infrastructural services from the taxpayers’ pound should pay their proper tax to the Exchequer. That should be written into the contracts. The problem that the Committee has uncovered most is in relation to private finance initiative projects. An assumption is made by the Treasury in the cost-benefit analysis of whether to go ahead with a PFI project that income will come back to the Treasury through corporation tax, yet all too often the companies that take the PFI contracts or buy them subsequently take their interest offshore. A recent survey by the European Services Strategy Unit found 90 firms in PFI contracts funded by the taxpayer that were based offshore for tax purposes. HSBC infrastructure unit, which has a lot of PFI deals, paid only £100,000 in tax on £38 million in profit—a tax rate of less than 0.03%.

Finally, I agree entirely on simplification. Complexity breeds avoidance and evasion. All Governments are to blame. They might introduce complexities with the best of intentions, but they end up as wheezes for avoidance and evasion. Labour’s film tax credit was a classic example of that.

I urge the Government to stop talking—we all talk the same talk. We must now deliver on simplification and on those simple ways to ensure that tax avoidance is not used as an excuse for cutting public services.

4.22 pm

Nigel Mills (Amber Valley) (Con): It is a pleasure to follow the right hon. Member for Barking (Margaret Hodge) and I join the congratulations to the right hon. Member for Oldham West and Royton (Mr Meacher) on securing this important debate. I have spent a lot of the last few months debating tax—it came up in the Finance Bill and at various other times—which shows how important it is. I promise that I will not list any Take That songs to embarrass celebrities who seek to avoid tax. I got enough flak for that the last time I tried it.

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I agree with hon. Members who have spoken that it is absolutely right that the Government do everything they can to minimise tax evasion and avoidance. All hon. Members want everyone to pay the amount of tax they fairly owe, because that reduces the burden on everybody who does so. It is right that the Government take every step they can within the legal powers they have to ensure that that happens.

Hon. Members have discussed how much the tax gap is. The last HMRC figures say that it is £35 billion. I have served on the all-party group on beer, which has inquired into measures to tackle beer duty fraud, so I have been through in some detail the weakness of tax gap calculations. The same issue came up in the Select Committee on Northern Ireland Affairs, which has had an inquiry into fuel duty. There is a problem in calculating how much revenue we do not have—we do not get the revenue, so it is quite hard to know what it would be—but I suspect that £35 billion is not a million miles off either way. I fear that the figure will have increased in the last tax year. I am told that if we look at the difference between 2008-09 and 2009-10, we see that the big reduction was in the loss of VAT, which was probably caused by the slight lowering of the VAT rate. Obviously, the rate has gone up since, so the tax gap will probably have increased slightly.

A report has shown that the UK tax gap is one of the lowest in the developed world—it is about 14% of tax revenue. I believe the gap in the US is somewhat higher, so it is not as if we are the worst in the world or have the weakest regime. We might even have one of the best.

It is important to understand that the tax gap is not entirely due to complicated tax avoidance or deliberate tax evasion. Much of it is innocent error and people lacking care in filing their returns—they do not actively seek to get it wrong. Measures to tackle avoidance or evasion will not close all £35 billion of the tax gap. There is not much we can do to get tax off someone who has gone bankrupt. Perhaps we could do more to prevent the amount of tax they owe from building up that high, but there will always be some loss when a business goes bust before paying its taxes. So we will not get that £35 billion down to zero—this will not be the panacea for the Government’s deficit problems—but it is right that we seek to get it down as low as possible.

I commend some of what the Government have done. Only this week, we saw a press release from the high tax unit showing that it was well ahead of its target and had already saved the Exchequer £500 million. The Government have adopted the right strategy, building on that of the previous Government, to deal with tax avoidance: they get in the disclosure of these ridiculously aggressive schemes, which ought to be closed down, and then they close them down. Then the strategy is to improve and tighten tax legislation for the areas most under threat, so that those opportunities are not there.

I am not convinced, however, that a general anti-avoidance or anti-abuse rule is the right way to go. I have concerns that it would contravene the rule of law. We, in Parliament, should pass laws that are clear, so that everyone understands what the law is, and then we can expect taxpayers to follow it. And if they do not, they can be severely punished. The problem with a

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general anti-abuse rule is that it allows the Revenue to say, “Okay, maybe you’re within the law, but we don’t think the law should have said what it said, so you should’ve been outside the law, even though you weren’t, and so we’re going to punish you.” I am not sure that we would want to give that power to a state agency in any other field of the law—the power to enforce not the law as we set it but the law as it might think we ought to have set it.

However much we stretch the general anti-abuse or anti-avoidance rule, fundamentally we are saying that the Revenue can tackle abuse that ought to be tackled by saying, “Ignore what Parliament says. Produce something that you think it should have said. And then enforce that.” I worry that that is a step too far—not that most of the people who would be caught would deserve anything less than they get, but the Revenue would be able to raise that stick against all manner of innocent individuals and businesses as well.

I worked as a tax adviser before entering this place. I can assure hon. Members that I was drawing up advance agreements on transfer pricing. I was not engaged in any naughty tax avoidance of any kind. Revenue Inquiries, in using its powers, writes, “Please send me this information. I think this doesn’t work as you say it does. By the way, if you don’t agree, I’ll have to use the general anti-avoidance rule.” And we have this stick being wielded in all manner of innocent situations in which businesses or individuals have got themselves into a complex situation where tax law is not clear, especially if there are a lot of transactions involving overseas parties.

Those individuals might be making perfectly sensible commercial attempts to apply the law as they think it is. They might not be trying to avoid tax but might be trying to be fully compliant, so the possibility of having that stick held over them and being told, “If you don’t pay up, we’re going to throw all these huge things at you,” will rightly concern lots of businesses around the country. We risk using a large sledgehammer, missing the nut and just increasing the burden on taxpayers. We have to look at the downsides of our tax regime appearing too unfriendly and uncommercial. How much investment will we lose if international businesses and individuals think that this is not a great place to do business? We have to be careful, therefore, about how much power we give the Revenue to apply its own interpretation of the law, rather than getting Parliament to do it.

Simon Hughes: I understand all the arguments and have seen the reports about general anti-avoidance measures and so on. Is there not the principle, however, that we should expect everybody, whether individuals or corporate bodies, to pay in tax at least a certain percentage of their profits every year to the Revenue—whether 20%, 25% or whatever—so that people know that they will not be allowed, by clever ruses, to avoid a minimum obligation to the state in which they live and work?

Nigel Mills: I thank my right hon. Friend for his intervention. Although that idea sounds attractive, and although various regimes around the world have minimum profit taxes and things like that, it would add huge complexity to our already too complicated tax regime. What we want is for people to be easily able to work out what tax they owe and then to pay it.

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I have tabled amendments to both Finance Bills while I have been here to make the tax regime simpler, so that companies can get their tax profit much closer to their accounting profit. It should be much easier for them to know what tax they ought to pay, and if they have made an accounting profit, they ought to pay tax on it. That kind of reform would be a far better way of going down this line and making the transparency agenda much clearer. We do not need most of the complicated adjustments, reliefs or allowances that were introduced, probably to support well-meaning ideas, over the last 150 years. Our regime is far too cumbersome. It incentivises things that we do not mean to incentivise and penalises things that we probably ought to encourage. If we moved to a much simpler, flatter regime, where what a business reports as its accounting profit is pretty much what it pays tax on, that would be in everyone’s interest. It would reduce avoidance and make it a lot easier for business to comply and a lot easier for the Revenue to see that there was compliance, so that the Revenue’s resources could then be focused on tackling avoidance and evasion, which is what we ought to see.

I would like to use my remaining time on a report published quite recently by the RSA called “Untapped Enterprise”, which I would recommend Members read. It looks at how we can try to move people out of the informal economy and get them to be fully compliant as employers and taxpayers. The RSA’s research and the conclusions it reached are quite interesting. The report says that a significant proportion of new entrepreneurs feel that they need to stay in the informal economy while they test out their business and see whether they can make a profit on it, because they know that once they get caught by all the tax compliance and other reporting requirements, that can take up so much time and money that they might not be able to get their business off the ground at all. Most of them do not stay in the informal economy because they want to avoid tax; rather, they just want to focus on running their business.

Some of the ideas in the report for tackling the hidden economy are quite interesting. It makes the point, which has been raised in the debate, that we need to nurture the concept that paying tax is right and moral, that we get proper value for public services from doing so and that everybody ought to be doing it. The last thing we want to encourage is a situation where people think the Government are against them, that the taxman is an enemy or that avoiding tax is a perfectly sensible, reasonable thing to do because they think, “It’s them versus us,” or, “Every penny I can save is a good thing.” We need to make the case that paying tax is the right thing and everyone should do it.

While I am on this subject, I agree that we need to reform the non-dom rules. I cannot see any justification now for saying that because someone’s father was born outside the UK they do not have to pay full tax, even though they have lived here for 30 years. There should be a cut-off at, say, 10 years, so that once someone has been here for 10 years as a non-dom, they lose their non-dom status and have to start paying tax on their worldwide income. That would be a fair compromise between not discouraging people from coming here in the first place and getting our fair share of tax out of them.

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The report also sets out the need to simplify the formalisation procedure. We need to make it simple for people to register their businesses for tax and to start paying. It needs to be simple to work out how much tax is owed. Let us not have people making the excuse that they did not pay tax because they did not know how much they were supposed to pay.

My final point is that we are moving towards a cashless society. It ought to be harder for business to be informal, because it is becoming more difficult for people to pay cash—indeed, I do not carry around a large amount of cash to pay for things with. That should move us in that direction, but we should also say to consumers, “Don’t pay people in cash; don’t encourage tax avoidance.”

4.33 pm

Mr David Winnick (Walsall North) (Lab): I congratulate my right hon. Friend the Member for Oldham West and Royton (Mr Meacher) on initiating this important debate. I hope that I can take up one or two of the points made by Government Members.

The overwhelming majority of people in this country pay tax through pay-as-you-earn, in the same way as we in this House do. In my constituency, the average salary for full-time employment is under £23,000. I think we can proceed on the reasonable assumption that my constituents are not making inquiries about how to set up personal service companies, let alone make offshore tax arrangements. What is at stake, as my right hon. Friends the Members for Oldham West and Royton and for Barking (Margaret Hodge) rightly pointed out, is fairness and justice.

It simply cannot be right for some of the richest individuals in this country significantly to minimise their tax liability. My right hon. Friend the Member for Barking also made the point that it cannot be right that those who receive a very high income—£500,000 or more—pay a lower rate of tax than my constituents who are earning £23,000. It is Robin Hood in reverse. That is why this debate is so important, and I hope that these discussions will not end without further action being taken by the Government.

The Prime Minister tried to make political capital out of the tax arrangements of a particular individual during the recent mayoral election in London, but it was that same Prime Minister who appointed Sir Philip Green to examine Government spending—I suppose we should be grateful that he was not asked to examine tax avoidance. The hon. Member for Wycombe (Steve Baker) said that we should not be unfair to those who create wealth, and that we should recognise their value. I do not dispute that, but I do dispute the way in which those who are heavily involved in industry, commerce or retail arrange their tax affairs in such a way that they pay nowhere near the amount of income tax that they should pay.

Steve Baker: I hope that the hon. Gentleman also heard me say that one of my two reasons for objecting to sophisticated tax avoidance schemes was that they involve people quitting the moral high ground. In a sense, I agree with him on this point but, ultimately, what I want is lower taxes.

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Mr Winnick: I take the hon. Gentleman’s point. If we are all for fairness in income tax arrangements, perhaps action can be taken.

I want to illustrate my point about the tax arrangements of the very rich, and I shall return to Sir Philip Green. He is not a non-dom. He resides and works in the United Kingdom, and he no doubt pays a fair share of tax. That is not in dispute. However, the well-known shops with which he is associated are actually owned by his wife, and she lives abroad, in Monaco, where apparently no tax is paid. That is an example involving one person—there are others—that illustrates the unfairness in the United Kingdom. A great deal of revenue is undoubtedly being lost as a result of the arrangements of that very rich individual and others, and I do not believe that that is fair. It seems that, few years ago, Sir Philip paid himself a modest £1.2 billion bonus, a lot of which went through various offshore accounts and tax havens and finally ended up in Monaco, where his wife resides.

My right hon. Friend the Member for Oldham West and Royton mentioned the amount of revenue that is lost as a result of such arrangements; I do not think that the figure he mentioned was disputed. Obviously, we can imagine how that money could be spent on hospitals and other essential facilities. In any case, it is absolutely wrong that there should be two or more different tax arrangements: one for the vast majority of our constituents and others for those who are very well off. That is why these points are being made today, especially from this side of the House.

When the Prime Minister tried to score political points by mentioning a particular candidate in the recent mayoral election, he did not of course mention Lord Ashcroft, a long-time deputy Conservative party chairman. I know that some of the Ashcroft money helped to provide funds for Conservative candidates in marginal constituencies. Lord Ashcroft apparently gave a pledge to give up his non-dom tax status in order to sit in the House of Lords. As far as we know, nothing was signed but a pledge was given, and the current Foreign Secretary, then leader of the Conservative party, was satisfied. We know now—it came out in the last weeks of the previous Parliament—that no such arrangements were made by Lord Ashcroft, who remained a non-dom.

It is interesting to note that in the United States—the least socialist country among all the democracies—no offshore tax arrangements are in place for its citizens. Wherever US citizens work abroad or wherever their money goes, they are subject to US tax regulations. It is very different from here. I must admit to being somewhat surprised when I learned that this was the position in America. All these offshore arrangements, tax havens and the rest simply need to be tackled, although whether this Government will tackle them is another matter.

Let me take up what my right hon. Friend the Member for Barking said. One issue relates to billionaires using these arrangements; another is the matter of personal service companies. I must confess that until someone was appointed to a public institution—a very high-profile one—in 1993, I was not aware of personal service companies, the purpose of which is to minimise one’s tax. I wrote to the director-general of the BBC before the Public Accounts Committee took the matter up. I asked how many of the BBC’s most senior managers—those earning £100,000 or more—had personal service companies. I received a prompt and courteous reply—there was no

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attempt to evade the question, although I would have used freedom of information facilities if need be—and I was told that there was only one such person. That is one manager, but the different position regarding presenters has arisen from the PAC.

Some of the most prominent broadcasters—not confined by any means to those of the BBC, as there are the commercial channels and others—and some other very prominent people in the media, including some who perhaps have liberal leanings, have arrangements whereby the amount of tax they pay is considerably less than it would be through PAYE. For all I know, there could be complications and administrative difficulties with personal service companies, but it is unfortunate, to say the least, that these highly paid individuals, perhaps receiving £500,000 or over £1 million a year—good people in many respects, I am sure, and very professional, as no one would doubt, irrespective of their private views—use an arrangement that substantially minimises the amount of income tax they pay. That is absolutely wrong.

Mark Durkan (Foyle) (SDLP): The hon. Member for Wycombe (Steve Baker) complained earlier about misinformation relating to tax avoidance. Was it not misinforming for the Government, at a time of high public indignation, to promise a “general anti-avoidance rule”, but then come up with something that is too narrow and limited to be deemed “general”, too indifferent and inert to be called anti-anything, and far too weak to be regarded as a “rule”?

Mr Winnick: I absolutely agree with my hon. Friend. Of course, I would not expect a Conservative Government to take effective action, and it is most unlikely that they will do so. In fairness to my own side, we took some action in some respects, although I would have liked bolder action. Like my right hon. Friend the Member for Oldham West and Royton and the hon. Member for Brighton, Pavilion (Caroline Lucas), I certainly hope that the next Labour Government—may that come about soon—will be far more stringent in dealing with these matters, which really need to be dealt with.

This country’s tax arrangements seem peculiar and odd, so let me repeat my earlier point. Whereas the large majority of people—my constituents and, I would imagine, the constituents of nearly every Member in the House—pay their taxes according to what has been agreed to by Parliament, there are those, be they billionaires or those whom I have described who earn very large sums, who pay less than what the House has determined. The sooner we end that position, the sooner we can be satisfied that not just our constituents but those with very substantial wealth and those who earn large incomes pay their tax as they should. This issue should continue to engage the House of Commons.

4.45 pm

Stephen Williams (Bristol West) (LD): I am very pleased that we are having this debate, and I thank the right hon. Member for Oldham West and Royton (Mr Meacher) for persuading the Backbench Business Committee to obtain the time for it. I have sat through loads of debates on the general economy, Finance Bills and all the rest of it during my seven years in the House, but we have never really engaged in a debate on the rights and wrongs of the tax system. We have started to

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get there in today’s debate, although, if I may say so, I did not think that the right hon. Member for Oldham West and Royton quite got there himself. I felt that some of his opening remarks were a bit too aggressive towards the Government. However, I am glad that he initiated the debate, because it is important to debate the definitions of tax avoidance and tax evasion, the perceptions of those quite different issues, and where the wrongdoing actually lies.

This is not about the tax rates that we discuss quite often in the Chamber, and it is not about who is paying their fair share, although I agree with my right hon. Friend the Member for Bermondsey and Old Southwark (Simon Hughes) that there is an important debate to be had about how much an individual and a corporation should contribute to society, and whether there should be a floor below which no one who is making a profit should drop in any given year. What we should be discussing today is payment of what is assessed and what is legally due: no less and no more.

Tax evasion is always wrong. I do not think that that is said clearly enough. It is illegal, and it is a fraud on the public and other taxpayers. It is always wrong, whoever is doing it, and whether a person is squirreling away millions in a secret bank account, paying in cash for work to be done on his or her own house, or paying a guest house owner. We shall all be going to party conferences soon, and I hope that none of our delegates will be tempted to pay guest house owners in cash. Those who do so should know, and should own up to themselves, that they are avoiding the obligation to pay VAT, and that it therefore follows that the person they are paying for the service is not putting the transaction through the books and is evading income tax as well.

Steve Baker: Does my hon. Friend agree that one of the reasons low-paid people evade tax is that taxes on them are far too high? One of the things that we need to do is continue the trend of lifting the lowest paid out of tax altogether.

Stephen Williams: I entirely agree with my hon. Friend. I am sure that he is delighted that his party is in a coalition with mine, because we are indeed lifting more of the low-paid out of tax completely by progressing towards a £10,000 income tax threshold. We should make taxes simpler as well as lower for people on low earnings.

This is a moral as well as a legal issue, and I think that perhaps we should discuss morals more in the Chamber. We all have a duty to pay, and cash in hand actually means cheating your neighbour. I think that, as Members of Parliament, we should be more courageous about making that clear. I agree with what the hon. Member for Walsall North (Mr Winnick) said about Sir Philip Green, but he is an easy target. We should be clear about the fact that if you are evading tax, it does not matter who you are: it is always wrong.

Health issues also arise, relating to tobacco and alcohol. My hon. Friend the Member for Amber Valley (Nigel Mills) mentioned beer duty. I am the chair of the cross-party group on smoking and health, and later this year I shall chair an inquiry into the smuggling trade—particularly the trade in tobacco, but there are cross-over issues involving alcohol. There is a very easy thing that the Government could do about those problems: they

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could tighten the bonded warehouse regime. There are currently very few restrictions on who can operate a bonded warehouse. Perhaps the Public Accounts Committee could consider that as well. A large amount of tax is evaded through the misuse of bonded warehouses and, as a result, people consume more alcohol and cigarettes and damage their health.

While evasion should be a black-and-white issue—it is always wrong—in respect of avoidance there are many shades of grey, which is a big problem. At the innocent end of the spectrum, tax avoidance is when people plan to pay no more tax than we in Parliament intend them to pay under the schemes we lay out in Finance Bills every year. I assume most of us have an individual savings account. I opened a new ISA earlier this year with Triodos bank, the ethical bank that has its headquarters in my constituency. Some of us signed a joint letter urging all parliamentarians to set an example by moving our money into ethical providers of finance, such as Triodos and the Co-op bank. By investing in ISAs, however, we are, of course, avoiding some income tax on our surplus capital.

I support all the various enterprise incentive schemes to encourage entrepreneurs to set up new businesses. I should declare a former interest, in that before entering Parliament I was a tax consultant working for some of the large firms that the right hon. Member for Oldham West and Royton laid into, but what we were doing was enabling people who were setting up businesses to take advantage of the reliefs his Government had introduced, in order to encourage more such people to take up good ideas, transform them into a business, create wealth and employ people. That is a good thing; that is good tax avoidance in the dictionary sense. Things go wrong, however, when such sensible planning is stretched too far and there are egregious schemes of avoidance, artificial transactions and contrived schemes.

The Chair of the Public Accounts Committee mentioned the very good exposés The Times did during the summer. As well as attacking Sir Philip Green and other fat cats, parliamentarians should make it clear that we condemn similar activities by those who are popular with the public—pop stars in Take That, premiership football players or Formula 1 racing drivers whom we are asked to believe all live in Monaco. These people make huge amounts of money because of the public enjoyment of what they do and they do not need to mitigate their tax below what the people who watch them perform think they have to pay.

What should we do about this? First, Her Majesty’s Revenue and Customs needs to focus much more on tackling avoidance. The headline figure of the number of people who work in HMRC has been mentioned, but how many people work for a particular arm of Government is less important than what they actually do when they are working. I hope the Minister will confirm that the efforts in the HMRC large business units and high net-worth units will be ever more relentlessly focused. The staff must have the appropriate training so they can match the skills levels of the lawyers, bankers and accountants pitted against them, and they must also have the necessary IT and other technical resources.

We parliamentarians have a duty as well. We can change the rates and rules, and we have done that in several Budgets since the 2010 general election. Last year, the Government tightened the rules in order to

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block a scheme of disguised remuneration, where individuals were receiving loans from their employers that they had absolutely no intention of ever repaying, and thereby were avoiding income tax. However, the Labour Front-Bench team at the time—I do not think its current occupants were part of that team, so I do not hold them personally responsible—instructed all its Back Benchers to vote against that coalition Government measure.

Under this year’s Finance Bill, we are introducing new stamp duty regimes in order to tighten up on the move of people buying properties via corporate envelopes and thereby avoiding stamp duty. The Liberal Democrats, and in particular my right hon. Friend the Business Secretary, called for that at the last election. Avoiding stamp duty in that way will now be almost impossible unless people want to incur an enormous liability in the future.

I listened carefully to what the right hon. Member for Oldham West and Royton was saying about the general anti-avoidance or anti-abuse regime. His words would have had more force if he had at least acknowledged that this Government had commissioned a report by Graham Aaronson. He has been in the business for more than 40 years, so I cannot think of anyone better to chair a committee looking at how we can tighten up on avoidance schemes. At least this Government are introducing an anti-abuse regime. It may not be perfect to start with, but a rule is being introduced. The right hon. Gentleman’s Government had 13 years to do that, but it was persistently ruled out by the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown).

Mark Durkan: Is that observation not a bit like saying that if the Government were looking at creating an anti-strike rule, the person to put in charge would be Bob Crow?

Stephen Williams: Would the hon. Gentleman say that again, as I am not sure that I followed it?

Mark Durkan: On the logic that the hon. Gentleman has just deployed about the most suitable person to be looking at anti-avoidance, given his skills and predilections in that area, would the equivalent for a Government committing to an anti-strike rule not be to put Bob Crow in charge of that exploration?

Stephen Williams: It was the Bob Crow bit that I missed. That may be a fair point, but I would not put Graham Aaronson on the same moral plane as Bob Crow; I do not think that Mr Aaronson has held the public to ransom at various points. However, poachers do often make good gamekeepers. The Government commissioned the report and are acting on it, and they should be commended on doing so, given that the previous Government did nothing to put that in place.

We have talked about the domestic scene, but I wish to say something in passing about our obligations abroad to the developing world. During debates on this year’s Finance Bill, I mentioned how the rules tightening up on controlled foreign companies—that is fine, as it is our responsibility to secure our own tax base—will have unintended consequences for developing countries. It is for the Treasury to work in close concert with the

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Department for International Development to ensure that every time we change our tax law, we think through the implications that that will have abroad. In addition, some of our expanding aid budget should be expended on training overseas Governments to build up their expertise to make sure that they are able to levy taxes effectively and collect them from the multinationals operating in their countries. I know that a coalition of charities, including Christian Aid, is going to campaign on this issue later this year. I have been working with them, and I look forward to continuing to do so throughout the rest of the year.

Simon Hughes: Will my hon. Friend also encourage the Government to examine anti-avoidance measures involving offshore territories such as those that have been started in countries such as Finland?

Stephen Williams: My right hon. Friend makes a good point. I think that there is a duty on Parliament to make sure that we are clear about our intentions and clear about what is wrong, and on the Government to allocate the resources to catch the people who go beyond the rules.

4.58 pm

Frank Dobson (Holborn and St Pancras) (Lab): I congratulate my right hon. Friend the Member for Oldham West and Royton (Mr Meacher) on persuading the Backbench Business Committee to put forward this debate. It is clear that nobody really knows how much the rest of the tax-paying taxpayers are being swindled out of as a result of tax evasion, tax avoidance and late payment. All we know is that a huge amount of money is not being collected. The question is: whose fault is it?

One of the functions of the House of Commons is to identify who is to blame for waste and inefficiency. On the failure to collect tax we need look no further, as it is mainly our fault as Members of the House of Commons. The rich and the big corporations do not pay what they should, HMRC does not collect as much as it should, and Ministers and officials suggest laws and regulations that do not do what they should, but we pass those laws and regulations. It is our job to decide what tax should be paid, but we tend to forget that it is also our job to put in place statutes and regulations to make sure that the tax we have voted for actually gets paid.

We are pretty good at making sure that most working people pay income tax, national insurance, council tax and, generally, VAT, but when it comes to dealing with large corporations and very rich individuals, our record is, frankly, pathetic. We, the House of Commons, pass statutes and regulations that are simply not up to the job. Government after Government have announced that they are cracking down on tax avoidance and evasion, but the experts in the City keep weaselling away, finding loopholes in the laws we have passed. It is probably true that we will usually be one step behind the City tax advisers, but at the moment we are not one step behind, but stumbling along several laps of the track behind those working the scams in the City.

I believe that this House needs to get its act together. I am not suggesting that we change the way we decide what tax should be levied, but once that has been decided in the usual way, I believe that the practicalities of how it is to be collected should be subject to much

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better scrutiny and final detailed approval by the House. I suggest that a taxation Select Committee should be established to concentrate exclusively on ensuring that any tax we have voted for is actually collected. The Committee should be able to hire expert advisers and require written and oral evidence from Treasury and HMRC officials and outside witnesses.

The taxation Committee would not need to trespass on the wider aspects of economic and fiscal policy covered by the Treasury Committee. Its sole object would be to formulate new tax regulations and practices in order to give minimum scope for avoidance, evasion and late payment. It should also monitor continuously the effectiveness of any existing arrangements and so keep up with the latest scams. Were the House of Commons, by this approach, to give tax collection the priority it deserves, I believe it would result in much more effective law and practice. Whatever the outcome, it could not possibly be less effective than the present arrangements.

That is not the only problem. Parliament is being denied the right to know what is going on at HMRC. Most of us would agree that most of our fellow citizens are entitled to keep their tax affairs confidential but, like my right hon. Friend the Member for Barking (Margaret Hodge), the Chair of the Public Accounts Committee, I would argue that that anonymity should not apply to major corporations. I remind the House that recently we had the ridiculous situation in which our Public Accounts Committee was told that it could not be told the details and background of the deal that an individual HMRC official had come to with Vodafone because they referred to the affairs of an individual taxpayer. Some people believed that the scam involved Vodafone being let off a tax liability of £6 billion. No one, apart from one or two people at the Inland Revenue and at the company, knows what the truth is. Can we tolerate that lack of transparency and affordability over a sum that is roughly equal to the taxpayer subsidy to the agriculture industry?

I hope that colleagues in all parts of the House see at least some merit in what I am proposing and recognise that we simply cannot go on as we have been doing. Clearly any new arrangements would need to be very carefully thought through, but they really should not be the subject of party controversy. Two of the main rights of a freely elected Parliament are to pass practical and workable laws and to control the raising of tax. We have a duty to the people who sent us here to exercise those rights effectively and so make a better job of it than we have been doing for decades.

5.4 pm

Penny Mordaunt (Portsmouth North) (Con): Over the past few months we have heard much about the morality of paying tax, whether it has been through the pillorying of the rich and famous, scrutiny of the conduct of big business operating in the UK or through the auspices of the Christian Aid tax fairness bus currently touring the country focusing on the conduct of UK businesses operating overseas.

Today there has been much discussion about individuals’ and businesses’ tax obligations to the state for the benefit of one’s fellow citizens. We have not heard much about the state’s obligations towards our citizens and

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businesses with regard to tax collection, and I want to rectify that today. Paying tax, being compliant and paying a fair amount is a two-way street. It is morally right that we should pay our taxes; evasion and aggressive avoidance are wrong. But just as the Government have a moral duty to spend taxes wisely and get good value from our public services, so, too, HMRC has a moral obligation to the taxpayer to ensure that its requests are reasonable and fair.

HMRC has extraordinary powers, frightening in their extent and enormity, that are enshrined in laws seemingly as complex and wide-ranging as the current tax code. Fifteen years ago, the relationship between taxpayer and tax collector was much more evenly balanced. Now there are punitive penalties for failing to submit returns, even if no tax is due or if HMRC owes the taxpayer a refund. The old tax tribunal system has been replaced with one that is far more rigid and less even-handed, and HMRC is able to issue completely unreasonable tax assessments to force taxpayers, who may have a legitimate dispute, to pay tax that they might not owe while their case is being investigated.

I often think that all that is missing from HMRC is the uniform and that it could be argued that we live in a state of financial martial law. It is time that the debate on the morality of tax turned its focus on those extraordinary powers, which often have a detrimental effect on precisely those citizens who have been absent from this debate so far—those on low incomes, the isolated, the vulnerable and older people.

Our tax code is hugely complex. The most popular edition of the tax guide now has over 17,000 pages; if my hon. Friend the Member for Wycombe (Steve Baker) has not read it, he can comfort himself with the thought that he would have had little chance of remembering what was in it if he had.

The system is especially complex for pensioners. In the last year of the Labour Government, the National Audit Office estimated that some 1.5 million older people had overpaid tax. Those overpayments have serious financial implications for the elderly, whose income is about 25% under the national average. Although the elderly are generally more compliant than taxpayers as a whole, they are often less aware of what they should do to comply and what allowances they are entitled to and they are more likely to face massive life changes such as retirement, bereavement or serious changes to their health that bring with them inevitable tax consequences.

Picture the confusion of the 91-year-old who after being widowed becomes a taxpayer for the first time, or the lady with inoperable cancer, whose husband has Alzheimer’s, pursued for failing to provide tax returns that HMRC had been sending to an address she had not lived at for nine years, despite its being clear that her allowances exceeded her income. Imagine the chaos caused to the life of a widow who received a tax demand for £3,500 as the Revenue had not been collecting tax on her state pension due to the fact her P161 was not sent to her when she retired at 60. Picture the gentleman who was being chased for underpayment wrongly, because neither he nor HMRC realised that he was entitled to the blind person’s allowance.

I applaud the work of Age UK, the Low Incomes Tax Reform Group and Tax Help for Older People. With their help, all the examples that I mentioned were

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resolved with a happy ending—evidence that the staff at HMRC are perfectly reasonable when these issues are pointed out. However, without that professional help and advocacy, many people end up paying more than they owe, with substantial detrimental consequences to their quality of life. That situation is not acceptable.

The complexity of the tax code and the frequency of HMRC errors mean that it is not reasonable to expect the burden of responsibility for checking demands to lie entirely with those vulnerable people. HMRC must at least have some responsibility for its own mistakes, especially if the consequence to the taxpayer of fulfilling that underpayment would be great hardship and would over the long term be detrimental to the public purse, as we saw with tax credit maladministration under the last Government. I would go further and say that HMRC should have an obligation to ensure not only that codes are correct but that for those on low and fixed incomes allowances are being used and people are as tax-efficient as they can be. That should be a performance measure that we judge it against.

Governments must take responsibility for their mistakes too. The Minister will be aware that I have had correspondence with him on the principle of retrospective taxation. It obviously behoves the Government to close loopholes as they are revealed, or better still to anticipate and remove them during the legislative drafting process. Nevertheless, when a loophole has been found in legislation, it is not illegal for it to be exploited—possibly morally repugnant, but not illegal. When clause 55 of the 2008 Finance Bill was discussed in Public Bill Committee, the Minister voiced the Conservative Opposition’s concern about its retrospective nature. If it was wrong to legislate retrospectively in 2008, it cannot be right now. We must work to close tax avoidance loopholes, but we must consider whether it is morally justifiable to take retrospective action on tax avoidance in the case of relatively low earners who signed up to schemes that were advertised openly and publicly and of which the Government and HMRC were aware.

Finally, I want to raise the subject of digital exclusion, specifically in relation to HMRC’s policy which makes it compulsory for all businesses, including the smallest, to file their business returns online. As a result, the proprietors of many micro-businesses who are unable to use a computer—for various reasons, including disability, age and lack of broadband access—have had to incur often disproportionate costs to employ an agent to file online for them or face penalties for not being able to file by electronic communication. Several proprietors have appealed their penalties, and those appeals are waiting to be heard by the First-tier Tribunal in November this year. The amounts charged are tiny—£100 for not filing online—but the costs to HMRC and the public purse in pursuing these cases are significant. The three lead cases involve older people, all with disabilities, who are unable to file online, and there is no statutory exemption for those with disabilities. There are many examples of otherwise compliant taxpayers being pursued relentlessly for small sums because of their inability to move to a digital channel to transact with HMRC.

The age of austerity and the recent focus on the moral good of paying taxes should not give HMRC any respite from simplifying the tax code, publicising allowances,

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reducing errors, and supporting businesses in hard times. It is in its interests and everyone else’s that it does so. It is better for the public purse that a business that has been paying tax on time for decades but has fallen on hard times survives and those jobs are kept. It is better for the public purse that an older person has that little bit of extra income to which they are entitled in order to stay well and independent. It is better for the public purse that HMRC’s resources are not taken up with correcting silly mistakes and are focused on tackling high-value evasion and aggressive avoidance.

I congratulate the Minister on the progress that he has made in simplifying the tax code, promoting common sense, and lifting many people out of paying tax altogether. May I urge him to go further, faster for the benefit of the Exchequer and the most vulnerable in our society?

5.13 pm

Mr Virendra Sharma (Ealing, Southall) (Lab): Thank you, Mr Deputy Speaker, for giving me the opportunity to speak in this very important debate.

We all know the context in which this debate takes place. We all speak to and listen to our constituents at our surgeries and in our town centres, and we know that they are hurting as a result of an international financial crisis caused by irresponsible bankers and made worse by a double-dip recession made in Downing street. The majority are hard-working families and individuals who pay their fair share of taxes and play by the rules, and expect others to do the same.

Given the budget deficit and strain on the public finances, it is all the more important to ensure that everyone pays their fair share of tax and that tax avoidance—playing the system and looking for loopholes—and tax evasion by those who engage in criminal behaviour to evade paying tax are vigorously clamped down on.

The vast majority of those engaged in tax avoidance are the rich and wealthy, and there is, rightly and unsurprisingly, a public outcry when celebrities, senior civil servants, business men and others use tax avoidance schemes to avoid paying their fair share of tax like everybody else. It is morally repugnant and obscene for a wealthy celebrity to pay only 1% in income tax.

The Government are right to consult on introducing a focused and targeted general anti-avoidance rule to stamp out such abuses. I fully support such a move. Tax avoidance legislation has become ever more specific and complicated. A GAAR should reverse that situation and allow a better use of HMRC resources to tackle avoidance across the board.

I part company with the Government on their current job-cutting at HMRC. I welcome the extra £970 million that they have put into tax collection up to 2014, but it makes no sense to cut jobs when the Department has been successful in collecting more tax. Over the past five years, HMRC has raised an extra £4.32 billion and the Public Accounts Committee’s report shows that an additional £1.1 billion could have been collected if 3,200 job losses had been avoided. It cannot be right to make job cuts when so much tax remains uncollected.

The Public and Commercial Services Union is 100% right on that and the public will think it a very strange thing to do when 11 times the extra investment that the Government are putting into tax collection was collected

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by hard-working HMRC staff over the past five years, and when even more could have been collected if the 3,200 jobs had been retained. Why are the Government planning another 10,000 job losses? I ask the Minister to think again. This is an investment that will result in billions for the Exchequer.

One of the jobs that staff saved from redundancy could do is work in my constituency, throughout London and other parts of the country to tackle the so-called “beds in sheds” problem. A minority of unscrupulous landlords are exploiting the vulnerable by renting out substandard outbuildings at extortionate rates and evading tax. My constituents regularly ask me, “Why should these landlords get away with not paying tax like everyone else?” This problem is all part of the shadow cash economy that denies the Exchequer billions in tax revenues.

The Government have given one-off funding to help councils tackle the problem with multi-partner teams that include HMRC officers in addition to UK Border Agency, police and council officers; but to really tackle it, raise some revenue and disrupt the shadow economy, more consistent resources are needed in both financial and officer terms.

Billions of pounds of tax remains uncollected as a result of both avoidance and evasion. I urge the Government to be braver and invest more in HMRC, not cut jobs. The returns are clear, the public accounts are in need of it and the public are calling for it.