Finance (No.2) Bill

Debate between Baroness Clark of Kilwinning and Jonathan Edwards

Tuesday 8th April 2014 Commons Chamber

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

I beg to move, That the clause be read a Second time.

[The Temporary Chair (Katy Clark)]

With this it will be convenient to discuss:

Amendment 4, in clause 1, page 2, line 11, at end insert—

‘( ) The Chancellor of the Exchequer shall, within three months of the passing of this Act, publish a report on the impact of setting the additional rate of income tax at 50 per cent.

( ) The report must estimate the impact of setting the additional rate for 2014-15 at 45 per cent and at 50 per cent on the amount of income tax currently paid by someone with a taxable income of—

(a) £150,000 per year; and

(b) £1,000,000 per year.’.

Clause 1 stand part.

I should inform the House that due to an administrative error some names in support of new clause 4 were omitted from the amendment paper. A revised version is available from the Vote Office with all names correctly reproduced.

[Jonathan Edwards]

I am grateful to you for that clarification, Ms Clark.

New clause 4, tabled in my name and those of my right hon. and hon. Friends in Plaid Cymru and the Scottish National party, would have the effect of requesting the Treasury to commission a report into reinstating the 50p tax rate for earnings above £150,000 a year, or £3,000 a week, as I prefer to explain the policy to my constituents. I look forward to pressing the new clause to a vote at the appropriate time.

This is an example of bad timing, as I understand that the President of the Republic of Ireland is about to address Members of the Commons and the Lords in the other place. I am disappointed to be missing that. However, there is little doubt that the decision in the 2012 Budget to scrap the 50p top rate and reduce it to 45p is the signature fiscal policy of the current Administration. However, I recognise that the 50p rate existed only for the dying weeks of the previous Labour UK Government, even though they were in power for more than 13 years with a top rate of only 40p. That of course leaves the impression that it was merely an election gimmick for the 2010 general election rather than a matter of deep principle.

Labour’s 13 years of the 40p rate reflected what Lord Mandelson said on behalf of the Blair Government about being

“intensely relaxed about people getting filthy rich”.

None the less, it was expected that the 50p rate, which existed for the first half of this coalition Government, would be set in stone while the UK Government maintained their plan A fiscal strategy of cutting the deficit. Despite disagreeing with the UK Government’s fiscal strategy since entering the House, I accept that the “We’re all in it together” slogan coined by the Chancellor was politically very successful. It was based on the notion that all parts of society were equal partners in a moral crusade to reduce the annual fiscal deficit of the state; that rich and poor, young and old would have to feel the pain as the only remedy for the excesses of the past—or so the story went.

The decision to cut the 50p rate was therefore a political miscalculation in my mind because, whatever way it is dressed up, the Chancellor offered a tax cut for those earning more than £3,000 a week. The notion of “We’re all in it together” was blown apart with one act. How can the Chancellor and the Treasury expect the most disadvantaged in society to stomach reductions in their social security support while the richest get a tax cut? It was an act that confirmed that we are not all in it together.

Let us not forget that in the 2012 Budget a further cut of £10 billion in the social protection budget was announced from 2013 onwards, on top of those announced in the 2010 emergency Budget. Those are the cuts that we are living with today, leaving the clear impression that the tax cut from 2013-14 onwards for the highest earners in society was being paid for by cuts in welfare provision for the poorest.

Finance (No. 4) Bill

Debate between Baroness Clark of Kilwinning and Jonathan Edwards

Monday 16th April 2012 Commons Chamber

[Katy Clark (North Ayrshire and Arran) (Lab)]

It is a pleasure to follow the hon. Member for Watford (Richard Harrington). He made an interesting speech on an issue that we shall no doubt hear a great deal about in the near future.

The Finance Bill and the Budget are a huge wasted opportunity. So much needs to be done now, with more than 1 million young people out of work and a manufacturing base that is continuing to decline. We are continuing not to see the growth figures that we need if we want even to start talking about paying back the deficit. Many of the contributions from the Government Benches today have shown yet again that the Government’s policies are simply not going to get us out of this mess.

I believe that the Government’s position is ideologically driven. Many of their Members would believe in their policies irrespective of the economic position that we were in—for example, the comments about the need to get rid of employment protections in the workplace and to get rid of red tape would be made irrespective of whether we had 10% growth or negative growth in this country. The debates that we are having here are similar to those taking place across Europe, the United States and the west generally. We face massive challenges, but the answers being provided by Opposition Members, from whatever political party, are very different from those coming from Government Members.

[Jonathan Edwards]

Does the hon. Lady agree that what we are hearing from the Government Benches proves that the political right never lets a good crisis go to waste? Following the downturn in the economy, the Government are looking for further erosions of workers’ rights, which is extremely worrying and typical of right-wing politics.

[Katy Clark]

When we look at history, we see that, during economic crises, those on the right argue for policies that they would not get away with in other circumstances. We have seen that happen time and again. Perhaps the most comparable economic situation is that of the 1930s, and history shows that the policies that worked then were not those of tax cuts, of huge public spending cuts or of rolling back the state; they were the kind of Keynesian policies to which many Opposition Members are now sympathetic.

The policies of austerity that we are seeing not only here but across Europe are simply not working. We require very different policies from those in the Finance Bill and those being implemented across a range of Government measures. My party’s Front Bench has already mentioned the figures from the Institute for Fiscal Studies, which show that the average family is losing between £530 and £551 a year as a result of the measures being brought in now. The changes to tax credits being implemented are a central plank of the policies that will take away money from not only the poorest people, but those on modest incomes as well.

My right hon. Friend the Member for Knowsley (Mr Howarth) has already talked about the impact of the measures on his constituents. My constituents, too, are coming to see me to talk about these issues. For example, last week a nurse came to see me: she works 16 hours a week, her husband is retired, and she has a 13-year-old child, and she is losing £3,700 a year as a result of the changes to tax credits. She works 16 hours a week at Crosshouse hospital, and she has asked to increase her hours to 24 a week, but the hospital has not agreed to that. That is the reality of the situation for the many families who are going to be affected by the tax credit changes, including more than 11,000 families in Scotland alone. Unfortunately, in the present economic circumstances, many employers will not be in a position to offer more hours, even if they wish to do so. That is just one example of the way in which the Government’s changes are affecting people.

As I have said, I believe that the Budget is a missed opportunity. We have heard about the Government’s radical proposals for deficit reduction, and indeed we are seeing the impact of those policies in all our constituencies. We are seeing what were considered to be essential public services being cut. We are seeing services being taken away that individuals and communities fought for, generation after generation, and that did not come easily. The incomes of the richest people in this country have increased by about 20% over the past two years, but the incomes and living standards of most people, including the poorest people, are going down.

The Finance Bill does nothing to address any of those issues. It does nothing to address the inequalities in wealth in this country. The Government’s policies simply exacerbate problems that we already have. The Bill will do nothing to bring about the essential increase in jobs and growth that we need. We will start to pay off the deficit only when the economy starts to grow, but the Government are taking money out of the economy and out of communities such as North Ayrshire, which is disproportionately reliant on the public sector because the manufacturing sector that we relied on in previous decades no longer exists. We are seeing money being taken out through cuts in the welfare sector and the welfare state, and through cuts in benefits and tax credits. The measures that are now being implemented are taking money out of the pockets of some of the people who need it most.

I say to the Government that we need policies that will stimulate growth. They should use every financial lever at their disposal for that purpose, rather than introduce tax cuts for the wealthy in the form of a rate reduction from 50p to 45p, and a cut in corporation tax, which is an ideologically driven measure that will have no impact on jobs and growth. My hon. Friend the Member for Leeds West (Rachel Reeves) mentioned the figures from Ernst and Young which suggest that the Government’s measures could lead to negligible growth of 0.1% and have all sorts of other ramifications.

The Government have talked about being a Government for families and about us all being in this together, but the reality is that the Finance Bill, like many of the other measures that they are introducing in this place, week in, week out, will simply make Britain a less fair country, a less equal country, in which the gap between rich and poor, and between north and south, will become greater as time goes on. Furthermore, this Budget will not help the country to start to reverse its industrial decline. For much of my adult political life, I have been able to talk about us being the fourth richest country in the world; now we are the seventh richest, as we have failed to keep up with other countries that are advancing, failed to value our industrial base and failed to value our manufacturing. The Bill will do nothing to address any of these things. Frankly, this Government should be ashamed of coming forward with these proposals at this time. To a large extent, they are a political fix between two political parties in coalition, and they will do nothing to address the real problems that our constituents are facing.