My hon. Friend is spot on. We want absolute clarity. As I continue with my speech, the Committee will realise that the changes in clause 5 will barely have an impact on most people in our constituencies.
The changes are not asking someone who has been made redundant to pay more tax. The first £30,000 of the termination payment remains exempt from tax as well a national insurance contributions. As a result, the changes in clause 5 will not have an impact on 85% of people who receive termination payments. If we have constituencies where 90% of businesses are SMEs, the figure will probably be even higher than 85% in our constituencies. On average, 25% receive a payment of more than £54,000, so they are not exactly the least well-off in society. Those who are not following the rules and are not manipulating the loopholes will pay no additional tax. It is simply about clarifying the fine details.
2.45 pm
I was disappointed that Labour tabled amendment 4. The whole point of clause 5 is to close loopholes, preventing tax avoidance and ensuring that everyone pays their way. Amendment 4 will open up more wriggle room. If we accept it, what is to stop larger companies routinely reclassifying termination payments on account of injury to feelings with the sole aim of paying less tax? It is a naive amendment that would create new loopholes. The public will see this as political point-scoring by the Opposition. Not only did Labour not close loopholes when it was in power; it is trying to open new ones when it is in opposition.
The changes in clause 5 will bring in £430 million a year by 2022. They clarify and tighten the regulations, but I urge the Committee to reject all Opposition amendments to ensure that the changes are as effective as they can be. The Finance Bill is about addressing imbalances in the system and making important changes to the tax regime system to ensure that the rules do not unfairly benefit large companies. It will build on the hard work of the Government since 2010 that has seen tax payments increase by £1 billion. The tax gap, which has been mentioned so often this afternoon, has fallen to one of the lowest in the world at just 6.5%, down
from 10% under Labour, so let us just stick with the facts. I welcome clause 5, which will add to that record and ensure the tax system works for everyone.