Chief Secretary: Budget debate speech

This speech was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

A speech by Chief Secretary of the Treasury at the Budget debates on 19 March 2015

Mr Speaker, yesterday my right honourable friend the Chancellor set out the final coalition budget of this Parliament.

The measures contained in the Budget were all agreed between us. This included the significant increase in the income tax personal allowance, support for mental health, and tax measures to support motorists, Scotch whisky and the oil and gas sector, because together they make our society fairer and our economy stronger.

The fiscal forecast published by the Chancellor yesterday would, according to the OBR, return government consumption – the effective spending power of the state – back to the level last seen in 1964.

But the era of ‘Cathy Come Home’ is not my vision for the future of Britain.

The economic scenario I am publishing today has been produced by the Treasury, based on assumptions I have provided, using data from the Office for Budget Responsibility’s forecast.

To finish the job we started in 2010 requires roughly £30 billion of fiscal consolidation by the year 2017-18. All parties in this House signed up to that in January.

Our first priority must be to ensure that those with the broadest shoulders bear the largest share.

So the fiscal plans I am publishing today are based on a further £6 billion pounds from tax dodgers, and an additional £6 billion of tax rises. Those in high-value properties, the banking sector, and others should pay more, rather than asking those working on low incomes to accept less.

This would leave around £12 billion of departmental savings and the remaining £3.5 billion from welfare savings. Those measures allow the structural current deficit to be eliminated in 2017-18. In fact, Mr Speaker, the coalition’s fiscal mandate is met with headroom of £7.7bn.

Once that task is complete, we need to continue to cut the debt as a share of the economy.

And we will not flinch from that task.

To do otherwise would be to leave an intolerable burden to future generations.

But, provided we can meet that target, borrowing for productive investment in infrastructure – in roads, railways, broadband and housing – can and should be part of our plan.

So this scenario would grow public expenditure as the economy grows after 2017-18. Ten years on from the financial crisis is the right time for the public finances to turn the corner. Continuing the pain beyond that date is unnecessary – it is simply cuts for cuts’ sake. To go too slowly, as the opposition recommend, would drag out the pain for too long.

The national debt as a share of the economy would fall in every year of this plan, from 78.2% in 17-18 to 76.1% and then 73.9%.

The implied spending envelope for departments would be £314.3bn in 2017-18, rising to £324bn and then £348.1bn in the last year.

That is £25bn, then £36bn and then £40bn more money available for public services and infrastructure investment than in the plans presented yesterday.

Just think what you could achieve with that.

It is money, for instance, that could be used to ensure the NHS has the £8 billion it needs to secure its future.

To ensure that the education budget can be protected – in real terms – from cradle to college. Not allowed to wither.

To support growth-enhancing spending of the sort delivered so effectively by my Rt Hon Friend the Secretary of State for Business.

Or to reward the hard working public servants whose pay restraint has helped so much to balance the books. Public servants have made big sacrifices. We need to repay that.

Mr Speaker, no Chief Secretary has ever had to control spending the way I have. And no Chief Secretary should ever have to do so again.

But this scenario proves there is simply no need to shrink the state in the way some in this House propose.

The recovery secured, the fiscal mandate met, national debt down, the public finances turned the corner. A stronger economy and a fairer society. A better future for the United Kingdom. That is what these plans deliver.

But fairness is not simply embodied by the numbers on a spreadsheet.

It is also about the actions we take.

Nothing makes people more angry than the sight of people refusing to pay the tax they owe.

Last month I committed to ensure that any individual or company who facilitate tax evasion would face stronger criminal penalties and financial sanctions.

Today, we deliver on that commitment by publishing a substantial package of next steps in the clampdown on these immoral and illegal practices.

We inherited from the previous government a tax system with more holes than a Swiss cheese and more complex than a Rubik’s cube. The opportunities for those who wished to get away without paying were many and varied.

For too long, our tax system struggled with the fact that a small minority felt it perfectly OK to indulge in tax avoidance and commit the crime of tax evasion.

The public will not tolerate being stolen from any more.

When this Coalition Government came into office we made it clear that we would eradicate loopholes which the previous administration had left wide open.

And that if you have not been compliant, we will give you the chance to put your affairs in order – but then we will come after you.

Since 2010, in every year of this Parliament we have put in place measure after measure to tackle abuse of the tax system.

And HMRC will have secured £100 billion in additional revenue over the course of this Parliament.

This includes more than £31 billion from big businesses, and an extra £1.2 billion from the UK’s 6,000 richest people.

Yesterday’s Budget announced further measures targeting those who persistently enter into or market tax avoidance schemes that HMRC defeat.

The Budget also announced game-changing information exchange agreements with over 90 tax authorities worldwide.

Today, I can announce the next step: a tough, comprehensive new evasion-deterring package.

First. For offshore evaders, following consultation we will introduce a new strict liability criminal offence, so you can no longer simply plead ignorance in an attempt to avoid criminal prosecution. Strict liability will bring an end to the defence of “I knew nothing, it was my accountant m’lord”.

Second. We will introduce a new offence of corporate failure to prevent tax evasion or the facilitation of tax evasion. No longer should any organisation be able to get away with facilitating or abetting others to evade tax. If people help a burglar, they are accomplices and criminals too. Now it will be the same for companies who fail to prevent their employees helping tax evaders. They will be treated as accomplices too.

Third. We will increase financial penalties for offshore evaders – including, for the first time, linking the penalty to underlying assets. A billionaire evading £5 million of tax won’t just be liable for that £5million.

Fourth. We will introduce new civil penalties so that those who help evaders will have to pay fines that match the size of the tax dodge they facilitate. So if you help someone evade £1 million of tax, you risk a penalty of £1 million or even more yourself.

And fifth. We will extend the scope for HMRC to name and shame both evaders and those who enable evasion.

Our message is simple. Come forward and settle your affairs, or be caught and face the consequences.

These measures, Mr Speaker, are helping put in place a far more effective tax system in the UK.

Once again, it combines fiscal responsibility with fairness.

We will finish the job of dealing with the deficit, and do so fairly.

We will get the national debt down. We will secure the economic recovery. And we will have no tolerance for people who evade tax, or those who help them.

And that is the approach which will deliver a stronger economy and a fairer society.

I commend this Statement to the House.