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Finance Bill

I have always been a supporter of the national minimum wage. Fifteen or 20 years ago, when I was a Back Bencher, I promoted a private Member's Bill proposing its introduction before it was finally introduced by this Government. The rate appears to be slowly increasing—it is now £5.52 an hour—and I believe that, without any loss of employment, it could rapidly be raised to £6.50 and probably to £7. So I rather agree with what my hon. Friend has said. The cost of restoring the 10p rate would be £6.6 billion. To concentrate the gain on those in need—the Institute for Fiscal Studies spoke of 5.3 million losers; I do not know whether that is the exact figure, but the number is clearly substantial—one obvious mechanism would be to limit the restoration to poorer taxpayers and those who pay the standard rate of tax. As about 12 per cent. of taxpayers pay the higher rate, that would immediately recoup £2.4 billion. The problem would be how to raise the remaining £4.2 billion. There are several ways in which we could make the tax system a whole lot fairer, and I hope that in Committee next week we can examine amendments suggesting how that could be done. It is probably little known that although United Kingdom-based individuals hold some £284 billion in shares or UK-based unit or investment trusts, the total declared disposal value of quoted shares in 2004-05—the last year for which we have figures—was only £5.8 billion, or just 2 per cent. of their shareholdings. It is inconceivable that, on average, their portfolios are changed in total once every 50 years. In fact, it is known that the average market holding at that time was only 14 months. The first strand of a strategy of recoupment for the Treasury could be the ending of what is clearly substantial undeclared share trading on the London stock exchange. Even if individuals traded their portfolios only half as frequently as the actual recorded rate, every 14 months—and we can be certain that that would be an underestimate of the degree to which they trade—if the proceeds were collected, stopping evasion would still raise the revenue take by at least £4 billion a year. Collection could be guaranteed by a requirement for automatic declaration by the stockbroker of all such deals. Another remarkable fact is that nearly half all commercial property in the UK—I think the exact figure is 45 per cent.—is now owned by foreign nationals. I have no objection to that. Yet they are unlikely to pay UK tax on their UK property sales, unlike the practice in many other countries where non-residents do pay tax on their property gains. In addition to the revenue lost, that distorts the UK market. Closing this gap by charging capital gains tax on the sales of foreign holdings could well form a second strand of the strategy. Property disposals in 2004-05, in the latest information we have, accounted for nearly a third of all reported capital gains, amounting to £5.3 billion. That suggests that the gains to foreign property owners amounted to some £2.4 billion. Eighteen per cent. capital gains tax would yield nearly a further £0.5 billion. My third point is this. It may not be realised that a fifth of all financial assets sold and subject to capital gains tax have been held for less than a year. Gains in terms of liability to capital gains tax, however, are meant to arise on investments, which, by definition, are usually meant to be long-term holdings. Those arising from short-term trades are likely not to have arisen from investments at all. It is clearly right that the profit in that case should be subject to income tax. More than £1 billion of chargeable gains was declared on these disposals in 2004-05 and the percentage rate was only 13 per cent.—a far lower proportion of profit compared with disposals as a whole, which amounted to 52 per cent. Ending that anomaly could also provide the third arm of recoupment for the Treasury and would yield at least a further £0.5 billion. Those three actions alone—I am well aware that there are many others—would raise around £5 billion a year and would certainly be more than enough to recover the revenue resulting from restoring the 10p tax rate while concentrating its benefit on the lower paid, which seems the sensible way to do it. Of course I would be the first to say that there are many other options that the Chancellor could equally consider. I want to mention one or two of them very quickly. Recent research prepared by Richard Murphy, one of the country's foremost tax experts, found that the 50 largest UK companies almost always pay 5 per cent. less tax on average than they declare on their accounts. As a result, the actual corporation tax rate paid by these UK companies in 2006 was 22.5 per cent., when the rate set by Parliament was 30 per cent. By the end of 2006, the cumulative tax savings recorded in the accounts of the 50 largest companies amounted to no less than a staggering £47 billion from deferred tax charges for which no date of payment is set. The amount actually exceeded the total tax paid by all companies in 2006 by some £2 billion. Frankly, it is indefensible that persons on £200 a week should be required to pay more tax when the 50 largest companies each currently receive on average £1 billion a year of tax benefit. [Interruption.] I am being asked to finish in time and I will certainly do so. I will make one further point. If these sources of revenue still are insufficient for the purpose—they are more than sufficient in my view—continuing the crackdown on tax haven abuse following the German lead, which I think is very helpful, must be pursued vigorously. It has already led to more than 60,000 people admitting substantial undeclared income in offshore bank accounts in tax havens such as the Channel Islands and the Isle of Man, with, the Revenue expects, the prospect of £500 million in tax recovery. Her Majesty's Revenue and Customs is rightly targeting those who have declined to make a voluntary declaration, and no doubt much more will be brought to light. All of this raises the spectre of redistribution from rich to poor, which I am glad has already been mentioned in the debate. That has been a political taboo subject in this country for the past 30 years. However, with inequality between the highest and lowest incomes currently growing faster than at any time in recent history, and also with rapidly increasing food, energy and housing costs for the poorest, redistribution has never been more justified—and it would, at last, signify that we had a Labour Government who really meant business.