• Questions

    Mid Devon Advertiser
    28 July 2017

    Last week like all other weeks was busy. Along with appearing before a committee to discuss (and to be tested and probed) on the forthcoming Customs Bill which I will be taking through the Commons in the Autumn I also had my first turn at the Despatch Box in the Commons during Treasury Questions. These sessions are always highly charged and are when ministers are held to account in front of the House. Each department (Education, Health, Defence etc) has a Question Time slot during the first part of the parliamentary day. Treasury appears every 6 weeks and last Tuesday I was on the front bench next to the Chancellor fielding a variety of questions relevant to my brief. Most were on corporation tax and the level of receipts achieved given that we have been successively reducing corporation tax rates through time. Under the last Labour government Corporation Tax was at 28% and that for small businesses at 21%. Both rates have now been reduced to 19% and both will come down further to 17% by 2020. You might think that dropping tax rates as dramatically as this will have reduced the total tax take but in fact the opposite has occurred. As the rate has fallen from 28% to 19% the amount of tax raised has increased by no less than 50%. Much of this is due to the fact that if you tax less then you create more economic activity as companies invest more and those outside the country move operations and activities into the UK. There are other factors in play including the general improvement of the UK economy over the period but it remains the case that high taxes stifle activity. Labour’s position is to ramp corporation taxes back up to 26% and tax for small businesses to 21%. Given the increased amount raised by reducing these tax rates it is not clear how raising them will bring in more. Other questions from the Opposition benches centred around the idea that better off people are personally paying too little tax. The evidence indicates the opposite. The highest earning 1% pay 27% of taxes in the UK (a significantly higher percentage than under Labour) – or put another way the wealthiest 3,000 pay as much as the least well off 9 million. Much of this has been driven by the government taking 3 to 4 million of the lowest earners out of tax all together by increasing the Personal Tax Allowance (the level below which no tax is paid) from £6,475 in 2010 to £11,500 today. There is a similar picture with businesses – the perception is often that big businesses are not paying their fair share (and there have of course been some examples of where this has been the case) but the largest 20 UK multinationals pay a full half of all corporation tax. This was my first outing in the Commons since becoming Financial Secretary to the Treasury and I am looking forward to future sessions.