amendment of the law
Edward Leigh Excerpts(11 years, 9 months ago)
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Mr Edward Leigh (Gainsborough) (Con)
As usual, the Secretary of State is making a very good case. If most people do not notice any difference in the service provided by local government despite all the cuts, does that serve as a lesson for central Government as well?
Mr Pickles
My hon. Friend makes a very reasonable point. My own Department in central Government has reduced its running costs by 41% in real terms, so we have led by example.
The Government have set about turning things around. This is a complex area, and the solution requires action on multiple fronts. We have taken three important steps. First, we are radically reforming the planning system to crank up the engine and get things moving. Secondly, we are giving builders certainty so that they can get Britain building. Thirdly, we are intervening dramatically to help people step on to the first rung of the housing ladder. It may be helpful if I set out our approach to each of those issues.
Mr Peter Hain (Neath) (Lab)
Contrary to the Chancellor’s mantra, Britain’s return to recession was not made in Europe. It was made in Britain by the severe fiscal squeeze that the Chancellor launched nearly three years ago. Problems in the eurozone spell trouble for the UK economy—of course they do—but the Chancellor never mentions the fact that Britain has benefited from the recovery of the USA economy, which accounts for 20% of our trade, and is currently growing four times faster than the eurozone is slowing, because the USA took the route of economic stimulus and stuck to it. Britain set out on the same path under Labour after the banking crisis, and the economy began to pick up. However, the coalition veered off as soon as the Tories and Lib Dems took office, turning the road to recovery under Labour into the road to ruin.
Cutting too far and too fast means that the Chancellor has missed all his key targets. In the year that is ending, his target deficit—the cyclically adjusted current deficit as a share of gross domestic product—is twice what he originally said it would be. Next year, the Office for Budget Responsibility expects it to be four times what he planned. He has also missed his public sector debt target: instead of falling to 67% of GDP in 2015-16, under the Budget it will fall to 85% two years later, in 2017-18. That is a surreal definition of success: debt falling upwards. Salvador Dali would be proud.
Zero growth has forced the Chancellor to accept higher borrowing targets—more than £200 billion higher over five years than he planned in 2010. Most of the cuts that have been announced have yet to hit home. Cuts and austerity will continue Britain’s economic inertia, with more disastrous, scorched earth economics to come. Growth, not cuts, should be the priority. Sadly, there is plenty of spare capacity in the UK economy, which could easily grow quite quickly for a few years by taking up the slack, with borrowing, the deficit and debt falling. Jonathan Portes, former chief economist at the Cabinet Office, said:
“A few years of 3% growth—and given the amount of spare capacity in the UK economy, there is no reason that should be infeasible…—and much of the problem will simply vanish”.
Growth is the magic bullet for overcoming our deficit and debt problems.
Mr Hain
Cuts have fuelled the recession because they have driven demand out of the economy. Getting the economy growing again, as I said, is the key to cutting the deficit, then stabilising and bringing down the debt burden. Once the economy is growing again, it will be much easier to deliver any remaining tax rises or spending cuts that may still be necessary because, as Jonathan Portes says, jobs will be plentiful, real incomes will rise and companies will invest again.
The Tory charge is that Labour would increase borrowing. The answer is, yes, in the short term, we would, but to reduce borrowing in the long term. Borrowing more today can mean borrowing less tomorrow by getting the economy growing again. President Obama’s 2009 stimulus package added to the US federal deficit in the short term, but as US interest rates fell, spending and output rose, and dole queues shortened. As a proportion of America’s expanding GDP, its overall deficit has shrunk every year since 2009, contrary to what has happened to our deficit. A budget boost that triggered real recovery in Britain could follow the same pattern, speeding up the growth of UK national income, cutting the deficit as a proportion of GDP and causing the debt burden to fall.
That is what the Budget should have been about, but old habits die hard as the coalition partners continue to peddle their big deceit. First, they said that the entire global banking crisis was caused by Labour recruiting far too many nurses, doctors, teachers and police officers, and that the trigger for the world financial collapse—sub-prime mortgage defaults in the USA—was all Labour’s fault. The second big deceit is their claim that today’s public sector deficit was caused by excessive Labour spending. To quote utterances of almost every Conservative MP as if on a dreary looped tape, too much Labour borrowing led to too much national debt, so the cuts are all Labour’s fault. They never admit the truth. They never say why, if spending was “out of control” and wildly excessive, the Chancellor in September 2007 committed a Tory Government to matching Labour’s public spending plans for the next three years, up to 2010.
The Chancellor knew only too well that Labour’s spending was affordable, otherwise he would not have signed up to that. The Tories never acknowledge that, until the global banking crisis, British Government debt was low, below that of France, Germany, the USA and Japan, and lower than when we took over from the Tories in 1997. Ten years of steady economic growth under Labour allowed us to pay down debt by the equivalent of £90 billion today, saving taxpayers some £3 billion a year in interest payments. We did fix the roof while the sun was shining.
Between 1997 and 2007, annual Labour borrowing averaged only one third of annual borrowing by the Thatcher and John Major Governments. This is the fourth dreadful Budget by a dreadful Government. It is the same old story from the same old Tories: Budget day blues for Britain. The Chancellor is playing a peculiar game of leapfrog with himself. Every Budget brings worse news. Every autumn statement confirms that things are worse than expected. The Government are failing on growth, failing to improve living standards, and failing on their debt, borrowing and deficit targets. They have got to make way for Labour.
Fiona Bruce (Congleton) (Con)
I refer to my entry in the Register of Members’ Financial Interests.
I welcome the Budget on behalf of the almost 4,000 hard- working small and medium-sized enterprises in my constituency—companies such as Dutton Contractors in Middlewich, which I visited on Friday and had the privilege of opening two new warehouses for. It is a family business that was started in 1974 by the father, John Dutton, who is a farmer. It sells and transports building construction materials. The son, Richard Dutton, has so developed the business recently that it now has 80 employees. The decision in the Budget to further stop Labour’s planned fuel rises is worth £7 to every family each time they fill up a family car, but it is worth considerably more to companies such as Dutton Contractors, which has a fleet of vehicles, so it very much welcomes the Budget.
Dutton Contractors also welcomed the £2,000 national insurance allowance. It was also welcomed, in particular, by Neon Freight Ltd, which is based in Holmes Chapel. Honours go to Ian Mallon, the proprietor of that freight forwarding company, and currently its sole employee, for giving the fastest response to the Budget. He sent me an e-mail at 1.28 pm—the Chancellor can barely have sat down. The e-mail’s subject was, “Employers tax/Budget”, and it reads:
“Great news… please send my thanks to G.O… I will be taking on staff this year.”
That is what I call a result.
Having said that, however, I am disappointed that the Government appear once again to have done nothing to honour their manifesto commitment—it is a coalition commitment and certainly a Conservative manifesto commitment—to recognise marriage in the tax system through transferable tax allowances for couples where one partner stays at home. Many people are genuinely bemused that such an important commitment should remain completely untouched well into the second half of this Parliament. They are increasingly bemused by the announcement of the introduction of tax-free child care worth up to £1,200 every year for children aged up to 12, but obtainable only by either single parents working or couples where both partners work. The Prime Minister said:
“This is a boost direct to the pockets of hard-working families in what will be one of the biggest measures ever introduced to help with childcare costs.”
But do families with one parent who stays at home not work hard, too? That has not sent out a positive message to mothers and fathers who stay at home and commit themselves to parenting; it does not say to them, as I think we should, “We value you.”
Fiona Bruce
My hon. Friend is absolutely right. I am not criticising the Government’s decision to support child care costs; I am saying that they have got the balance wrong by doing that while not at the same time honouring the coalition commitment for transferable tax allowances for married couples.
I have massive respect for those mothers and fathers who stay at home. I have never stayed at home to work and have always worked outside the home, but many parents do so sacrificially, and many parents in one-earner families, as Department for Work and Pensions figures clearly show, stay at home because they have to. Many have significant child care responsibilities for very young children, or care for sick or disabled relatives. It is interesting that the Government quoted OECD figures in support of its decision last week. Let me quote some OECD figures: the tax burden on a one-earner, married couple family on an average wage in the UK is now 42% greater than the OECD average.
I have raised this issue in respect of every Budget since I have been in this House. Two years ago, having tabled an appropriate amendment to the Finance Bill, I received from my hon. Friend the Exchequer Secretary to the Treasury a letter that said:
“Dear Fiona
I am writing to about the new clause on transferable personal allowances for married couples that you have tabled for the Finance Bill. I agree entirely that marriage is a positive institution and it is clear from our manifesto that we believe this should be recognised in the tax system.
We are keen to send a clear message that family and marriage matters and that strong and healthy families help create a strong and healthy society. We must do more to support families and the tax system is one way in which this can be achieved…you can rest assured that our commitment to bringing forward these changes remains firm and that we are assessing various options with a range of different costs and will bring forward proposals at the appropriate time.”
I believe that that time is now. If we genuinely believe in choice—a word much trumpeted last week on the announcement of support for child care costs—we should not be making it more difficult for mothers to stay at home but should give them that choice, too. The Prime Minister has said:
“If we are going to get control of public spending in the long term…we should target the causes of higher spending, one of which is family breakdown. We should do far more to recognise the importance of families, commitment and marriage”.—[Official Report, 2 June 2010; Vol. 510, c. 429.]
This year, I again call on the Government, at the third time of asking—it sounds a bit like calling the banns of marriage, but that is quite appropriate—to insert a provision into the Finance Bill, this time by way of their own amendment, to introduce transferable allowances for married couples. That is quite simply the right and honourable thing to do.
Mr Edward Leigh (Gainsborough) (Con)
I hope that the hon. Member for Belfast East (Naomi Long) will forgive me if I do not follow on from what she said, but she spoke a lot of sense about air passenger duty and I agree with her.
One of the most powerful points made by the right hon. Member for Leeds Central (Hilary Benn), who led for the Opposition, was when he mentioned somebody who visited his constituency surgery only last week who, after serving in a job for 30 years, had been made unemployed. As it happens, I had a similar case of somebody who had served for 30 years but who had now, through no fault of her own, been made unemployed, could not find a job and was in negative equity. That brings home to all of us the human nature of what we are dealing with. Although we may bandy statistics across the House, we are dealing with a desperate situation—for which, by the way, I do not blame the Chancellor—and we should put at the forefront of our minds the appalling human tragedy of ordinary people who are being put out of work and who cannot find work.
In my view, the best way to recreate the conditions in which people can find work is to create a balanced economy that can recreate confidence. Unfortunately, our public spending is unbalanced: half of our £730 billion or £750 billion budget is taken up by health and welfare, which are ring-fenced, and that puts enormous stresses and strains on all other budgets.
Despite the attempt by the right hon. Member for Neath (Mr Hain), with characteristic chutzpah, to rewrite history, I am not sure that it is possible to argue that austerity has caused this recession when, in fact, we are spending more than ever before—despite the fact that the figures were manipulated for this Budget—and borrowing more than ever before. The central thrust of the Labour party’s argument, which is that the problems have been caused by this Government, does not add up and the British people do not think that it adds up. They want more positive suggestions from the Labour party that show what it would do better in the face of the desperate international situation.
Richard Graham
Did my hon. Friend find it curious that the hon. Member for Coventry North West (Mr Robinson) seemed to be unclear about why our exports are effectively stagnant, when they had been expected to rise by 6%? Surely he must know that exports to the EU have fallen off a cliff while other exports have risen.
Mr Leigh
Absolutely. That shows the sort of difficulties in the Labour party’s arguments. If it is to form a Government, it must come up with a viable alternative.
I do not support cutting for the sake of cutting. If Tesco has a problem in its bread department, it sells bread more efficiently; it does not cut the number of loaves it sells. I agree about that, but the Labour party cannot give simplistic solutions based on more wasteful spending, nor can it constantly say that our problems would be solved if we restored the 50% tax band, when every study proves that it reduced revenues to the Treasury. As we know, the top 1% of earners pay 24% of all tax revenues. Labour has to come up with something more intellectual and rational if it is to convince the British people that it is ready for government.
The situation is dire. The incomes of 2007 will not be seen again until 2019. According to the Institute for Fiscal Studies, we will need a further £9 billion of cuts to public services after the next election. In 2015, there will be £70 billion more borrowing than was predicted in 2010. Any Budget giveaways—I accept that this Budget is politically astute—will be soaked up by inflation rising faster than wages. That point has already been made about the 1p cut in beer duty. One would have to drink five pints every night for seven nights to save 35p a week. I am not sure that will impress anybody. The cut in corporation tax is welcome, but that is only a small part of the total cost to business. Business rates have increased by 13% in three years and are the prime motivator against growth in the small business economy.
The problems that we face are difficult, complex and international. I am still firmly convinced that we need a strategy based on levelling taxation as much as is possible. The attempt to bring corporation tax more in line with small business tax is a first step. We should try to flatten all capital taxes and business taxes. We should then move on to income taxes and get rid of the plethora of allowances, which fuels an industry based on evasion and avoidance.
At first sight, the excellent scheme that the Chancellor is trying to bring together to help with home loans is very good if it does not lead to a property bubble. However, it is a bit like somebody climbing a ladder with loads of our money, throwing it over the edge and saying, “May the fittest come and get it.” It is a bit like the person rushing towards the pool of Bethesda.
It would be much better to have a flatter, simpler form of taxation so that people make their own decisions and do not rely on Government handouts, and so that we do not have a huge industry based on evasion and avoidance.
We are creating a special child care allowance for people who want to put their children into child care. That is great, but why have we not fulfilled our pledge to introduce a married person’s tax allowance?
Fiona Bruce
Does my hon. Friend agree that we are out of line with international best practice in not recognising marriage in our income tax system?
Mr Leigh
We are out of line. I am quite prepared not to hold the Government to account on their solemn promise to bring in a married tax allowance if they get rid of the other allowances and restore universal child benefit and all the other things. They cannot have it both ways. They cannot make it tax and benefit advantageous for a mother—it is usually a mother—to go out to work if they do not help mothers who want to stay at home and add to the economy by looking after their own children. That is unfair and something has to be done about it.
We cannot carry on with Budgets that simply tweak things. We need a long-term strategy based on simplifying the tax system and on budgetary reform. We must remove as many of the allowances as possible. We must change the culture of constantly tweaking things with Budgets and instead look to the long term and create a more simplified and effective tax system.
Graeme Morrice (Livingston) (Lab)
I welcome the opportunity to speak in this important debate, because the Budget last week revealed the true scale of the Government’s economic failure. As the next election grows closer, the Chancellor faced a test. He needed to boost household incomes and help cut the cost of essentials, but neither of those was forthcoming and his Budget failed to do enough for low-income households.
With an eye fixed firmly on the next general election, the Chancellor is pinning his hopes on a housing boom. His make-or-break blueprint for rebuilding the economy is unlikely to make a difference to the nation’s finances, as the focus has clearly shifted towards manifesto writing, positioning and early electioneering ahead of 2015. More than ever, taxpayers will now underwrite the mortgages of hundreds of thousands of home buyers, and take stakes in newly built houses in a multi-billion pound attempt to stimulate the struggling economy. However, he risks causing another unsustainable boom in the housing market, putting billions of pounds of taxpayers’ money at risk and offering little hope to hard-pressed working families who are struggling to get on the housing ladder for the first time.
We face the biggest housing crisis in a generation, but the Government’s housing and economic policies will make it worse by stoking house prices rather than helping families find a home. The Government have insisted that homes sold through the right to buy scheme will be replaced with more affordable housing on a one-for-one basis, but the Budget included £4.5 billion of funding for housing, with only £225 million of that to be spent on affordable homes. If we do not tackle the fact that we are still not building enough homes, we will create another housing bubble that will continue to push house prices out of reach of the majority.
Not only is the Chancellor pressing ahead with a tax cut for millionaires, it now seems that his mortgage scheme will help people, no matter how high their income, to buy a subsidised second home worth up to £600,000. Surely people struggling to get a mortgage, and those who want to own their first home, must be the priority for help, rather than the small number who can afford to buy a second home. If the Government concentrated at least some effort on collecting taxes from international corporations that operate in this country, and closing some of the loopholes in the tax system, there would be more money to go around.
With the coalition’s axe in full swing, I am appalled that the Government place so much effort on reforming the benefits system and punishing the sick and most vulnerable in our society, while those at the very top have seen their incomes rise as never before. The financial sector is at the heart of the economy. Huge, multi-million pound payouts to “banksters”, while citizens cannot even afford to feed themselves, undermine any efforts to break with the past and are a timely reminder that the country is being run by the rich for the rich. As the rest of the country faces austerity, just an hour after the Chancellor delivered his Budget speech, Barclays bank paid nine fat cat bosses £40 million in share payments. That makes a complete mockery of claims that banks are cleaning up their act when it comes to their bonus culture.
At exactly the same time as the bedroom tax comes into force, the Government are prepared to give 13,000 millionaires, including the Prime Minister and the Chancellor, a tax cut of £100,000—£3 billion in total a year—while more than half a million households that are home to a disabled person will lose £700. That is simply not right.
Graeme Morrice
The hon. Gentleman clearly indicates how his Government have got their priorities wrong.
It is time for this Government to recognise what is very much evident: that they have got this horribly wrong and need to think again before it is too late. We need a lasting change of direction by the Government, to one that demonstrates compassion, puts ordinary people first, and recognises the right priorities, or —ideally—a change of Government itself.
Oral Answers to Questions
Edward Leigh Excerpts(12 years, 1 month ago)
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Mr Edward Leigh (Gainsborough) (Con)
1. What plans he has for future private finance initiatives.
The Chancellor of the Exchequer (Mr George Osborne)
Last week, the Government announced the details of a new approach to replace the private finance initiative with private finance initiative 2, which is a more transparent approach to securing investment in public infrastructure. The Government will become a shareholder in future projects. We can all see now that the public sector was sharing the risk under PFI. We will now ensure that we also share in the rewards.
Mr Leigh
I looked at PFI for nine years on the Public Accounts Committee. I am sure people will agree that it was a good system that was scandalously misused to rip off tomorrow’s taxpayers for the sake of today and to rip off the public sector in favour of the private sector. How can the Chancellor assure the House that, if he is to use PFI 2 to pay for large infrastructure projects, we will not repeat the mistakes of the past?
Mr Osborne
I sat on the PAC under my hon. Friend’s chairmanship and I remember our investigations into various hospital and prison schemes that had gone wrong. As we saw it, there were three problems. First, contracts were very inflexible, so it cost a huge amount to do things such as change light bulbs or clean hospitals and the like. Secondly, the private sector got all the upside of the projects and made more money than expected. Thirdly, there was no control on the overall off-balance sheet total. We are addressing all three: we are creating more flexible and transparent contracts; we will share in the upside by taking a public sector stake and having the public sector on the board; and at the Budget we will set out a control total for PFI 2 liabilities.
Oral Answers to Questions
Edward Leigh Excerpts(12 years, 2 months ago)
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Mr Speaker
Order. I am chairing these proceedings. Let me just make it abundantly obvious to the Minister: the hon. Member for Nottingham East (Chris Leslie) gets two questions. He does not get a third and it is not the business of the Opposition to answer questions in this Chamber—that is the responsibility of the right hon. Gentleman in respect of Government policy. Let us be clear about that.
Mr Edward Leigh (Gainsborough) (Con)
Notwithstanding what we have just heard, surely, given the still very high and worrying levels of public debt, is it not incumbent on all coalition Members, from whatever party, to continue to support the Chancellor in the very difficult decisions he may have to take in the coming months that may amount to further cuts to public spending?
Greg Clark
It is in everyone’s interest to support the path we have embarked on to pay down the deficit. We know that the confidence in the UK economy, which has led to record low interest rates, depends on credibility—a credibility that the policies of the Opposition, by borrowing more, would jeopardise.
Multiannual Financial Framework
Edward Leigh Excerpts(12 years, 2 months ago)
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Greg Clark
I cannot confirm that, but I noted from the right hon. Gentleman’s article in the New Statesman that he is calling for increases in the budget, especially for the structural funds.
The Commission’s proposal is totally unacceptable, so let me say very clearly to hon. Members, as well as those around Europe who might be watching, that it is not happening. On the MFF, we will accept no real-terms increase in the EU budget for the next seven years. We will veto any proposal that either does not cut the budget or does not at the very least freeze it for the whole of the period. There will be no more budgets that pursue ever closer union through ever higher spending.
Mr Edward Leigh (Gainsborough) (Con)
I am sure that the Financial Secretary heard the Prime Minister’s excellent words today calling for a cut in the budget, so will he resist the blandishments of a very polite gentleman who appears to be impersonating the Conservative Chief Whip, and join those patriotic Conservative Members who will be voting for a cut in the budget?
Greg Clark
I have great respect for my hon. Friend, with whom I served on the Public Accounts Committee, and I shall explain why the Prime Minister will indeed be arguing for a cut, and why we have our mandate.
Mr Edward Leigh (Gainsborough) (Con)
The figures we are talking about are truly enormous. In the three options—the EU proposal, a real-terms freeze and a cash freeze—we are talking about commitments of £990 billion, £885 billion and £771 billion, so these are very important matters, affecting every man and woman in this country. I have to say to my hon. Friend the Member for Banbury (Sir Tony Baldry), with whom I have spent 29 years in this House, that his speech was quite inflammatory. His main line of attack appears to be that those of us who are going to support the amendment are somehow putting our Government at risk by joining with the Labour party. I have heard the argument before; it was actually the argument put by Neville Chamberlain in the Norway debate, when he said that he could rely on his friends. Over the years we have been here, many Members of Parliament have taken the view that principle is sometimes more important than partisanship. We have consistently argued about these matters through difficult times and it is quite wrong to blame us—those who have taken an entirely consistent position— for putting the Government’s political position at risk.
Martin Horwood (Cheltenham) (LD)
Given his experience in this House, does the hon. Gentleman not think that nailing one’s colours to a wholly unrealistic negotiating position will weaken the position of the British Government going into this financial negotiation and result in a worse outcome for this country, for his constituents and for Europe? He needs not to lecture us about principle but to consider the genuine reality of the situation.
Mr Leigh
Let me first make one more comment to my hon. Friend the Member for Banbury, who made a very important point. He represents the Anglican tendency in this House and I represent the Catholic tendency. If someone goes to confession and repents, we should accept them into our fold. We should not turn them away. If the Labour party has changed its mind, it has repented.
Mr Leigh
Well, there we are. Contrary to what the hon. Member for Bolsover (Mr Skinner) said, I do not think that this manoeuvre is entirely cynical. We have come a long way—[Interruption.] People can scoff, but the Labour party is sensing a change of mood in the country. It is entitled as an Opposition party to sense that mood and to feel that the patience of the British people is at its limit as regards giving more money to the European Union. It might be cynical—surely Labour is entitled as an Opposition party to use parliamentary tactics if it wishes—but there might also have been a sea change in attitude in the country and in the House. That sea change is also reflected elsewhere in Europe.
The hon. Member for Cheltenham (Martin Horwood) said that our proposal was totally unrealistic, but he should consider what is happening in our country. Every single Member of Parliament has police officers coming to all our surgeries every week whose pensions have been changed halfway through their time. They are serving shifts at all hours of the day and night, and they are coming to our surgeries because we are having to make real cuts to our police force. As has been said, we are having to make real cuts to our armed forces. Our own people are coming to us and saying that this is surely the time to make a stand. Given what is happening to the budgets in Greece, Spain, Portugal and Ireland, and given that great legions of young people in those countries are unemployed, is it so unreasonable just to ask the leaders of Europe to insist in the Council of Ministers on a real cash freeze? Is that unreasonable? I do not think so—I think it is entirely reasonable.
Our friends in Europe take the House of Commons very seriously. As is known, I am happy to be a Francophile and I watch what happens in the Assemblée Nationale. This debate could not be replicated there. It is being watched, however. This is the House of Commons. We were created to guard the nation’s finances and look after the interests of our own taxpayers. Why cannot the House of Commons, on this great occasion, make a stand on behalf of the UK taxpayers? Why can we not say to our taxpayers that we stand with them? We are having to make appallingly difficult decisions about the police, the armed forces, education and health. All we are saying is that there should be a real freeze in the EU. This is not just about EU civil servants, 40% of whom earn more than £70,000 a year.
Mr Leigh
There is no time, I am afraid.
This is about real people in real places. For instance, I represent a farming constituency. The UK spends £7.1 billion a year on subsidising foreign farmers, giving some £33 billion and receiving £26 billion. On average, the UK receives £188 per hectare, compared with France, Germany and Holland, which receive £236, £251 and £346 respectively. Some 42% of the EU budget is spent on subsidising farming and fishing, despite their accounting for only 2% of European gross annual value. These are real issues that affect real people. The House of Commons now has a chance to take a stand and we should put principle before partisan politics.
Finance Bill
Edward Leigh Excerpts(12 years, 6 months ago)
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Rachel Reeves
That is the first time I have heard a Finance Bill being called a consultation—I do not even know where to start.
The Budget in March also included a 3p rise in fuel duty in August and limits on charitable donations. All this was necessary, we were told, to deal with the deficit. Yet the Bill before us, as we reach Third Reading, contains none of those measures. We have had a series of abrupt reversals that, according to one estimate, will cost the Exchequer nearly £700 million.
Opposition Members argued that these measures were misconceived from the start, and that adding to the costs faced by families and small business at this time would make it even harder for our economy to climb out of the recession that this Government have dug us into. But it must be a matter of regret that so much uncertainty and confusion has been created for those affected, doing real damage to businesses, charities, pensioners and families, and that at a time of tight public finances the Government’s financial and fiscal planning seems to be in such disarray, with no one at all clear what the Government’s priorities actually are.
Despite the Government’s belated change of heart on those matters, the Bill remains a deeply flawed, unfair and utterly inadequate response to the problems facing our country today and that is why the Opposition will vote against it this evening. The Bill still offends against the most basic principles of fairness by giving priority to a reckless and irresponsible tax cut worth tens of thousands of pounds for a few thousand millionaires while at the same time asking millions of ordinary people who are already under pressure from rising prices, falling wages and cuts to tax credits and benefits to make further sacrifices and endure further hardship.
The Bill breaks a promise that the Chancellor made in the Budget last year to Britain’s pensioners that their age-related allowance would rise in line with inflation for the rest of this Parliament and instead imposes a stealth tax that will hit 4.5 million people over the age of 65, all of whom live on modest pension savings. The Bill is breaking the principle of universal child benefit and still means that one-earner families will lose thousands of pounds a year while a two-earner family on almost twice as much will keep all their benefit. It is a botched, half-baked measure dreamt up for a party conference speech but the measures are described by the Institute of Chartered Accountants in England and Wales as a “policy disaster” that are
“in danger of becoming a practical disaster when they come into effect”.
We have raised a number of other concerns about the Bill, such as the controlled foreign companies changes and the impact that they will have on developing countries. What is most wrong with the Bill, however, is that it represents a massive missed opportunity to end the recession and get our economy working for ordinary working families, pensioners, businesses and young people. It could have been a Bill that took the tough decisions necessary to ensure that those who could make a fair contribution to deficit reduction did so, so that those hit hardest by the current crisis were not put under even more pressure.
It could have been a Bill that cut VAT, giving immediate relief to hard-pressed families and giving our economy the stimulus it needs to get growth under way again and to make unemployment fall. It could have been a Bill that redirected money wasted on excessive bank bonuses and put those resources to better use, helping young people get back to work and constructing new affordable homes.
Rachel Reeves
The Government are borrowing £150 billion more. That is the cost of the Government’s failed economic policies. The reality is that with more people out of work claiming benefits and fewer people in work paying taxes, Government borrowing is higher and not lower.
Finance Bill
Edward Leigh Excerpts(12 years, 6 months ago)
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Mr Edward Leigh (Gainsborough) (Con)
Does the hon. Lady agree that child benefit as we have traditionally understood it has had one great advantage, in that not only does it recognise the role of women in bringing up children, but its universality has ensured that there is virtually no fraud or error, and nor does it in any way add to the unemployment or poverty trap?
Cathy Jamieson
I thank the hon. Gentleman for making that point. It is important to understand that the fact that this was a universal benefit ensured that everyone who ought to have had it and who needed it was able to get it. When we debated this topic in the House previously, some Members tried to characterise our concerns about these proposals as Labour trying to protect a universal benefit paid to high earners, rather than looking at the overall principled position, and some may try to do so again this evening. I should repeat what I said both earlier this evening and in that earlier debate: that kind of argument does not wash at all in terms of fairness from a Government who have given a tax cut to millionaires while millions of ordinary families are feeling the pinch.
During the earlier debate, I also reminded Members of article 27 of the United Nations convention on the rights of the child, which the UK has signed up to. It outlines the obligations on states to assist parents to meet the needs of their children, and I pointed out that a number of organisations—as well as a number of Members—had highlighted the importance of those obligations. Sadly, that exhortation to make this debate about fairness to children and families seems to have gone largely unheeded, apart from some honourable exceptions. There have been Westminster Hall debates looking at this issue in more detail, in which a number of Members highlighted both the unfairness of the proposals and their practical difficulties.
Mr Gauke
Clause 8 introduces a new income tax charge that will be used to withdraw child benefit from a claimant or their partner who receives income of more than £50,000. The charge will reduce the cost of child benefit to the Exchequer while protecting those on low incomes. This measure, like so many others, is a consequence of the previous Government’s profligacy. We are having to make these decisions because of the budget deficit that we inherited—the largest in peacetime history. Unfortunately, it is the British people who have to pay for the debt left by the last Administration. Without addressing the deficit we will face sterner economic conditions, so we are having to ask for more. However, we will do that in a way that is both fair and reasonable, and this measure will ensure that those on low incomes will remain unaffected and those with the broadest shoulders will bear the greatest burden.
Although reconsidering the universality of child benefit was never our first choice, it is the position we have been left. I recognise that many people are concerned about the change and believe that child benefit must somehow be sacrosanct. However, it simply is not fair that an individual who earns £15,000, £20,000 or £25,000 should pay for benefits for those earning £80,000, £90,000 or £100,000. When a Government need to raise revenue, it makes sense to turn to a measure with a broad base and significant numbers of recipients who do not rely on the additional payment that they receive. Child benefit is just such a payment. The steps that we are taking will raise £1.8 billion for the Exchequer by 2014-15.
Mr Leigh
What conceivable political point is there in a Conservative Government attacking 1 million of our own people—hard-working people on middle incomes and families in which someone, usually a woman, wants to stay at home to look after a child? What are a Conservative Government doing?
Mr Gauke
Speaking as a Conservative, I consider that all the British people are our people.
By raising £1.8 billion by 2014-15, we will ensure that those with the broadest shoulders bear the greatest burden. That was why my right hon. Friend the Chancellor announced that we would seek to withdraw child benefit from higher rate taxpayers. We always said that we would consider ways to implement the measure, but we have been clear that a complicated new means-testing system, which is what would happen if we extended the tax credits system in the way that some have proposed, would not be a sensible way forward. Instead, we should look to existing systems and processes to ensure that we can achieve our goal.
Clause 8 withdraws financial gain from child benefit from families in which one partner has an income of more than £60,000, and reduces the gain if one partner has an income of more than £50,000. It does so in the most efficient and pragmatic way possible, applying a tax charge on those high earners using existing processes. That charge will apply to an individual in receipt of child benefit, or to their partner if they are married or in a civil partnership or living as if they were married or in a civil partnership—a point that the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) made. That is an existing definition of partners within social security legislation and means that other adults living in the household will not affect the liability.
The changes will not affect those receiving child benefit who have income under £50,000, or whose partner does. Some 85% of families receiving child benefit, or 7 million families, need not be troubled by the changes. If an individual or their partner has income of more than £50,000, the charge will be tapered depending on their income. The equivalent of 1% of the child benefit award will be charged for every £100 increase over £50,000 in adjusted net income. Child benefit will be withdrawn in full only at an income of £60,000. Furthermore, the thresholds between which the taper will operate will not depend on the number of children.
The changes will take effect from 7 January 2013, and the individuals affected will include information relating to the charge on their self-assessment returns for the first time for the tax year 2012-13. The first payments of the charge will be due by 31 January 2014 if a taxpayer chooses to pay in a lump sum. Those affected will be able to opt out of child benefit payments—that answers a question that my hon. Friend the Member for Mid Bedfordshire (Nadine Dorries) asked. Some may wish to do so, although Her Majesty’s Revenue and Customs will set out clearly the options and implications. For example, if an individual’s income were to fall below £60,000, they may revoke their election not to receive child benefit, and payments would be resumed.
Finance (No. 4) Bill
Edward Leigh Excerpts(12 years, 8 months ago)
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Mr Chope
The hon. Lady is absolutely right: that is another of the behavioural consequences, the full implications of which are not yet apparent.
One has to ask why we are going down this road. The justification for it—the avowed policy objective—is this:
“In order to address the fiscal deficit, the Government believes that it is right to ask those on higher incomes to contribute more.”
The Government’s proposal, however, asks those on higher incomes with families and children to contribute more, while those on higher incomes without children are not asked to contribute more. I do not see how that can be fair.
In case anyone thinks this is an issue discussed only among academics, let me say that it certainly goes very close to the heart of many of my constituents. I shall quote briefly from a letter that I received since the Budget from a constituent living in Christchurch. He starts off:
“I am writing to express my utter disgust and outrage at your party’s stance on child allowance announced in the budget last week.”
He explains that he and his wife choose to work hard, believing that they have a responsibility
“to look after ourselves and to help to generate wealth for the wider community”
by contributing their utmost to industry. He says that he has an income of £60,000 and that his wife earns £12,000, providing a combined income of £72,000. As he puts it:
“under your disgusting new Tax rules we will lose the child benefit for our two children. However, in a household with two working parents earning £40,000 each, combined income of significantly more…that family gets to keep their benefit.”
Mr Chope
Before I give way to my hon. Friend, let me read the last paragraph:
“I ask for your commitment to continue your fight against this latest most disgusting taxation scheme on child allowance and rally your fellow back benchers against the current disgraceful and unethical budget.”
Mr Leigh
Unfortunately, we are introducing more and more complexity. For example, the new charge must be paid by the higher earner, who might not be claiming child benefit when the lower earner is claiming, even though the lower earner is not legally obliged to inform the higher earner whether he or she is claiming child benefit. This is an absurdity, making our tax system even more complex.
Mr Gauke
I recognise that not everyone wants to address the matter and that there are those who do not want to change the position whereby people earning £20,000 or £25,000 a year are paying taxes to fund child benefit for substantially wealthier families, and I realise that arguments are made to defend that. But if we are to do something about it, we have a choice. Do we do this through a tax credit system, which means putting everybody through that system, and doing it on a household basis, or do we try to find an alternative way of doing it that reduces the administrative demands? I do not deny that there is complexity in this method, but relatively, we believe that this is the simpler way of doing it.
Finance (No. 4) Bill
Edward Leigh Excerpts(12 years, 8 months ago)
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Mr Gauke
No, I really want to make some progress.
None of that has been changed by the Budget announcement. There is a borderline that causes confusion between repairs and alterations. The Budget decision also reflects the view that grants provide a more flexible mechanism than VAT for providing specific financial support for heritage—
Mr Leigh
This is a key point. The Government have announced that they will increase the listed places of worship grant scheme by £5 million, but they have cut it from £23 million to £7 million, so that is totally inadequate. What we want tonight is a commitment from them that they will resolve the problem. Half the ancient buildings in this land are run by the Church of England, by ordinary people who want to support their local communities. The Government must compromise on this issue.
Mr Gauke
I refer my hon. Friend to the comments that I made before his intervention.
Let me respond briefly to what was said by the hon. Member for Wrexham (Ian Lucas). We are restricted in regard to what we can do for public transport. If we provided a reduced rate for passenger transport, we would not be able to focus it entirely on charities; it would apply more widely to taxis.
Taxing static holiday caravans and larger touring caravans will bring their treatment into line with that of other holiday accommodation. VAT is already paid on mobile caravans, camper vans, canal narrow boats and camping equipment. We therefore propose to replace the current definition of a zero-rated caravan, which is based on size, with a new definition based on whether the caravan is designed for residential use. We are considering applying British Standard 3632, and are also considering an additional test. However, I have received representations from, among others, my hon. Friend the Member for Boston and Skegness (Mark Simmonds) arguing against that, and we will examine those arguments closely.
Finance (No. 4) Bill
Edward Leigh Excerpts(12 years, 9 months ago)
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Rachel Reeves
My hon. Friend speaks from her knowledge of her constituency in Hull and of the East Riding of Yorkshire, which will be particularly affected by changes to the caravan tax.
I was in Leicester on Thursday last week with my hon. Friend the Member for Leicester South (Jonathan Ashworth), speaking to small businesses which will be affected by the changes to VAT on hot snacks. Many businesses are worried, about both the additional tax they will have to pay and the additional bureaucracy of form-filling. As hon. Members said, it is not at all clear at which point VAT will stop being charged. What temperature does the food have to be, or by how much must it have cooled down before the tax rate goes to 0% from 20%?
We will also have a chance this week to debate and vote on important tax simplification measures. Given the generous decision of the Chancellor to simplify the tax arrangements of 4.4 million pensioners, I am surprised that they are not more grateful. That tax simplification will cost pensioners £83 a year on average and will cost hundreds of thousands of people who are coming up for retirement next year up to £322 a year.
The Chief Secretary referred to the Office of Tax Simplification. Its tax director has registered his concern about the changes to the tax allowance for pensioners and has said that the Government’s claim that they were only following its recommendations
“was not 100 per cent accurate”.
Meanwhile, Age UK was moved to write to the Chancellor about the change to tax allowances for pensioners. It stated:
“Age UK supports the OTS review of pensioner taxation and was very pleased to have been invited to be represented on the consultative committee. However given the OTS was set up with the aim of providing”
the Chancellor
“with independent expert advice on simplification we are very surprised and disappointed that”
he has
“announced a change to simplify the system without waiting for that advice.”
Contrary to coalition spin, this tax simplification will hit not those with big pension pots, but people with personal or occupational pensions that pay around £5,000 a year. It will hit people who worked in ordinary jobs for modest salaries, and who made sacrifices during their working lives to put away just enough to give themselves a small pension, which means that they do not need to depend on means-tested benefits in retirement. It is simply not true that they have been insulated from the effects of the current economic climate and other changes to taxation. Pensioners have been hit hard by VAT, quantitative easing, cuts to services that they rely on—not least the national health service—and massive increases in the heating and electricity bills for their homes. Older people deserve better than this mean-minded, penny-pinching measure. If Government Members agree, they will have a chance to vote down the granny tax later this week.
It tells people all they need to know about this Government’s priorities and the balance of power in the coalition that when the Deputy Prime Minister said that he would agree to cut the 50p rate if it was paid for by a mansion tax and the Opposition said that we would support a mansion tax if it was used to relieve the pressure on ordinary hard-working families, the Chancellor forgot the mansion tax, cut the 50p rate anyway and paid for it with a raid on pensioners’ incomes and a raid on charities.
Finally, we will offer the Chancellor a last chance to make good the great omission of the Bill—its failure to offer a shred of hope to the 1 million young people who are desperate to find work and its failure to do anything about the fact that long-term youth unemployment has more than doubled in the past year. Our amendment will open the way for the funding of a guaranteed job for every young person who is out of work for more than a year—a job that they would have to take up. That is the kind of measure that our country is crying out for. It would change the lives of thousands of young people and transform the prospects for our economy. It could easily be funded by raising new resources from the banking sector, which still squanders billions on bonuses while doing little to support British businesses and families. We will therefore offer Members a chance to vote for the reinstatement of the tax on bank bonuses to fund the creation of 100,000 new jobs for young people and the construction of 25,000 new affordable homes.
Mr Edward Leigh (Gainsborough) (Con)
If the 50p tax rate was such a painless revenue raiser, why did the Labour Government take 13 years to implement it?
Rachel Reeves
As the Chancellor once said, we are all in it together, and if we have a deficit to reduce it is right that those with the broadest shoulders bear a little more of the burden. That was why the former Chancellor increased the top rate of tax to 50p. This Government have reduced it and are instead asking millions of ordinary families and pensioners to pay more so that millionaires can pay less. That is their priority; the Opposition’s priorities are very different.
Mr Edward Leigh (Gainsborough) (Con)
Everything that the hon. Member for North Ayrshire and Arran (Katy Clark) says would be fair enough if what this Government were doing were any different from what a Labour Government would have been doing at precisely this time. The public sometimes lose track of the reality of the situation that we are in. We politicians talk in terms of billions or—perhaps soon—trillions of pounds, but a constituent put it to me like this, offering a better way of describing our situation. It is as if we were somebody who had an income of £50,000, who had knocked up a credit card debt of another £50,000, and who had promised to repay £4,000 of it but was actually repaying only £2,000. We are in a dire financial situation. I suggest that whoever were in government at this time would be doing much the same. In fact, I suggest that what the Government are doing is the bare minimum necessary to maintain market confidence.
We have had a lot of debate about the ratings agency, and I am sure that the Labour party is gearing up to tease the Government if there is any decline in our rating score, yet if we did anything less than what we are doing to address this deficit, we would be in dire trouble with the markets, and I have no doubt that interest rates would eventually have to rise, with all the consequences we know about for businesses and for ordinary mortgage payers. I therefore do not accept this apocalyptic view of the Government’s proposals. As I say, the Government are doing the bare minimum necessary to maintain market confidence.
I do not accept either the argument put forward by the hon. Member for North Ayrshire and Arran that there is some sort of right-wing plot—that we have been waiting for years for this crisis in order to take a stab at Keynesian politics and that, really, all we are interested in is a slash and burn of the public services. It is hardly a slash and burn, given the sort of figures we are talking about. In fact, Government spending is as high as it has ever been. All we are doing is trying to get to some sort of grip with the deficit.
Personally, I have always argued that the economy would benefit from deregulation and from simplification particularly of the tax system, leaving aside the total size of the public sector. I would have thought that Members on both sides of the House could accept that what is needed is simplification. How, then, are we going to get it?
I spoke in the Budget debate at about 6 o’clock. Such is the complexity of the modern Budget process that it is difficult for people to get a handle on what is going on as it is being enunciated by the Chancellor of the Exchequer. I was teased by one of the Whips because, apparently, precisely as I stood to say that it was a courageous Budget, coincidentally all the press started turning against the Government—and it has been pretty bad ever since. I say that it is courageous because the Chancellor has started to take some difficult decisions to simplify the tax system. We have heard a good speech about charitable giving. So much of the so-called bad publicity that the Government have attracted over the Easter break—whether it be over the so-called granny tax or charitable giving or child benefit or all the other problematic areas—shows that the Chancellor is beginning to try to address these appallingly difficult structural problems.
There has been a lot of talk about the Titanic this week—nobody should worry, as I am not going to repeat the tired old cliché about deck chairs—and I think that the whole structure of the ship is wrong when it comes to the tax system. The ship is unbelievably badly built, and it is gradually sinking under us. What I have found in listening to 28 successive Budgets in this Chamber is that the tax system has become progressively more complex. It was possible 25, 30 or 35 years ago for a Chancellor to come across as providing a reasonably coherent lecture in his Budget statement—we all used to get very excited because tax on whisky or the basic rate of tax was going to go up or down by 1p—but such levels of complexity have been loaded on to the whole tax process that it has become virtually impossible for any Chancellor to come out on Budget day with any coherent proposal that is not in succeeding days unpicked and trashed because of the hundreds of pages of small print. If the structure is fundamentally flawed—it is, I think, the longest tax code in the world apart from India, and one of the most complex in the world—it is virtually impossible for any Chancellor to get a grip on it. I have never made any secret of my personal belief that we have to be prepared to be radical. We cannot just try to improve the structure; we have to go back to first steps and argue what we really believe in. What I really believe in is a much flatter—ideally, flat—rate of tax.
I have recently read an excellent book written by one of our colleagues, my hon. Friend the Member for Stone (Mr Cash), about the 19th century statesman John Bright. He was wholly uninterested in politics, but was a substantial statesman, who continually argued in terms of retrenchment, sound public services and a sound financial system. He said:
“Better teach the people something good for the future than resign oneself to work institutions already in existence”.
I suspect that too many politicians—I do not blame those on the Treasury Bench, as I know what they are paid to do—are fundamentally doing what John Bright did not want to do, which is resign themselves to work institutions already in existence. I think that the purpose of politics, certainly for those on the Back Benches, is to try as John Bright said to try to teach the people something good for the future.
I believe that this idea of a much simplified tax system or a flatter and ultimately a flat rate of tax, which has always been dismissed as an idea of the radical right, is of increasing interest to those on the left. Why? We have heard a great deal about tax avoidance, and the more complex the tax system, the easier it is to avoid it. Every time we try to deal with the problem, we create more loopholes and more difficulties, making it easier for the rich to avoid paying tax. With a much flatter—ideally, flat—rate of taxes, there is no possibility for avoidance. The TUC claims—I am sure it is right; it is not known to be a particularly right-wing organisation—that tax avoidance results in a loss to the Treasury of £13 billion a year from individuals and £12 billion a year from corporations.
To make another left-wing point, some politicians have recently had a bad press; they have been standing for various public offices or arriving in this House with good incomes outside politics, but instead of paying tax like the rest of us at the basic and then higher rates, they have put their money into private companies in order to pay much lower rates. Some politicians in America who have huge incomes, including some bidding to become President, have had a very bad press, as we found that they paid minimal rates of taxation. Why is this? It is because the tax codes in both countries are so complex that the rich and the powerful can always avoid paying tax. They cannot do that, however, under a much simplified tax system.
Charlie Elphicke
Does my hon. Friend not think that politicians should give a lead? It is not just Ken Livingstone who has been egregiously avoiding paying tax. It is clear from the Register of Members’ Financial Interests that some Labour Members have been routing their funds into private service companies. Should that not be stopped; should not politicians set an example?
Mr Leigh
I do not want to ruin my argument and I do not want to lose any support that I might have from my friends on the Opposition Benches by recommending a tax on particular Labour politicians. The trouble is that there is always a huge temptation for anyone with a high income—a politician, an entertainer or a business man—to listen to the advice provided by chartered accountants. They will say, quite rightly, “Oh dear, why is a successful chap like you”—a successful chap like, for instance, my hon. Friend the Member for Dover (Charlie Elphicke), who doubtless has a very large income—“paying all this tax, when you could be setting up a small company and paying about 11%?”
In the past I have argued for a much flatter, ideally flat, rate of tax throughout earned income, but now I will be even more radical, and suggest that there is an increasing case for transposing that to small company income. I am not privileged to serve on the Treasury Bench, and I do not have teams of civil servants to advise me. I constantly come up with ideas such as this during Finance Bill debates, and I can produce figures, but I do not know whether they are correct. I have been told that a flat-rate tax of 22% with a £15,000 allowance would result in a reduction of £63 billion in tax revenue in the first year. Although I believe that the extraordinary savings that would be made through the ending of tax avoidance might well enable us to claw that back, there is no point in my simply going to the Library and then coming up with figures.
I see that the Minister is busily scribbling down every one of my pearls of wisdom at this precise moment. It would be really nice if, rather than just saying at 10 or 10.30 tonight “I thank my hon. Friend the Member for Gainsborough for making such an interesting speech”, he wrote to me in the next week or two, when he has the necessary leisure, telling me—on the basis of the Treasury model—how much of the cost of avoidance could be saved through the adoption of a much flatter, or ideally a flat, rate of taxation, under which it would increasingly not be worth people’s while to try to shift their income from one pot to another. Is that, in fact, such a radical idea? Has it been tried out anywhere else? Well, of course it has.
As I have said, the size of the UK tax code has more than doubled since 1997. The present situation is absurd. The Chancellor is doing his best, but whereas 15% of taxpayers will pay a higher rate in 2012, only 3% paid it in 1978. Graphs showing the rise and fall in people’s incomes according to whether they have one child or more feature extraordinarily sudden and tremendous blips because of the child benefit clawback from people who earn more than £50,000 a year, of which I have been very critical. I do not know whether this is correct, but I have been told that a family with three children and an income of between £50,000 and £60,000 faces an additional effective marginal tax rate of 24%, on top of income tax and national insurance. I cannot believe that the Chancellor wanted to impose such a sudden, steep burden of taxation on middle-income taxpayers.
Many Members favour helping people on very low incomes. I happen to believe that the best way of helping poor people is not to churn more and more tax and benefits in their direction so that they have very high marginal tax rates—as high as 73% in the case of those who increase their earnings if they earn less than £10,000—but to take them out of tax altogether. Let me say to my Liberal friends that the one good thing that they have done in recent years is to present that argument, and I think that they have made their case. An extraordinary burden has been placed on people on lower incomes, who have been taxed far too much far too early.
I believe that my idea of a flat rate of tax is not such a radical or bad idea but one that could appeal across the spectrum, and I urge my hon. Friends on the Treasury Bench to consider it carefully. Otherwise, every time the Chancellor seeks to tamper with the screws and the bolts on the Titanic to ensure that those watertight compartments do not just reach halfway up the forward decks but reach the top so that the thing does not sink, he will produce a Budget that sounds good on the first day but will be unpicked and unpicked.
I think that, rather like John Bright, the Chancellor needs to see that shining light on the horizon. He needs to say, “This is my strategy, this is my philosophy, this is what I want to do. I want to say to the British people that ultimately I will take pretty much the same share of the cake as has been taken in recent years.” We all know that, for all Mrs Thatcher’s reputation for being such a right-wing radical Prime Minister, it was only after many years that, by an almost infinitesimal margin, she gradually reduced the extent of the state’s take from ordinary people. It may be impossible for the Chancellor to make a great deal of difference in those terms, but he can say, “This is my strategy. I want to be upfront and fair to the British people, so that they know exactly where they stand. If you have an income of £300,000, I will take a third of it: I will take £100,000. If you have an income of £100,000, I will take £33,000—and so on across the spectrum.” Then there will not be all the hillocks and valleys and clawbacks and allowances and churning of benefits and taxation.
I am, in a sense, sympathetic to the philosophy behind what the Chancellor has been trying to do with child benefit. Why should middle-income earners pay tax at a certain level and then be handed it back in child benefit? I agree with the Chancellor that that is absurd. However, he got himself into a dreadful mess by taking the appalling step that meant that the moment there was one higher-rate taxpayer in a family, all that family’s child benefit vanished. I thought that that was very unfair on a family in which one person worked and another, usually the wife or female partner, wanted to stay at home and look after the children. I am not suggesting that such an arrangement is better or worse than the other form of family life, but I believe that it is simply unfair, which is why I have argued for a marriage tax allowance.
I will do a deal with the Chancellor. I will give up my campaign against his reduction in child benefit and my campaign against his continued failure to introduce a marriage tax allowance, despite what he said in his manifesto, if he will say to me, “I will get rid of all these allowances, and introduce a greatly simplified tax system which is fair and equitable for all classes of people.”
I agree that there should not be a tax system that distorts people’s choices. I agree that any attempt to influence behaviour through the tax system, whether it affects marriage, children, mortgage tax relief—as in the old days—or, now, charitable giving, will produce perverse incentives. It will cause people to adjust their behaviour to reduce their tax bills rather than doing what is right, and I want people to do what they feel to be right. I want the state to be open, fair and upfront about what it is going to take, and I want the Chancellor to come to the House and say in his next Budget “This is my strategy, and this is my belief.”
I accept that—bravely, courageously, with great difficulty, and in the face of an enormous amount of bad publicity over the last three weeks—the Chancellor has taken the first essential steps towards getting rid of those allowances, and I am prepared to stand by him. I am prepared to be unpopular over the granny tax, because I can see where he was coming from. The Chancellor considered it absurd for people to be paid that allowance. Although it was apparently very popular, when there was talk of abolishing it, no one remembered that it had been introduced by Winston Churchill in 1925. I am prepared to be unpopular by supporting the Chancellor on all those issues if he is prepared to enunciate his philosophy of creating a fairer and simpler tax system. That is a fair deal, I think.
Amendment of the Law
Edward Leigh Excerpts(12 years, 9 months ago)
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Mr Edward Leigh (Gainsborough) (Con)
It is a pleasure to follow the hon. Member for West Bromwich West (Mr Bailey), who always makes his arguments well. I apologise for the fact that I cannot stay for the whole of the rest of the debate; I wish to attend the memorial service downstairs for David Atkinson. I will take this opportunity to pay tribute to him on the Floor of the House. He served the House with tremendous distinction for many years, particularly in the Council of Europe. He was particularly hard-working on promoting democracy throughout Europe.
I see my neighbour, the hon. Member for Great Grimsby (Austin Mitchell), on the Opposition Benches. We have been in the House together for a long time, and we have heard many Budgets. I said to my wife this morning, “We have heard so many Budgets. Will this be just another Budget that takes with one hand and gives with the other?” but I think it is a very courageous Budget that is rather different from many that I have heard. I have sat through so many—from Nigel Lawson, John Major and the previous leader of the Labour party.
The Budget is courageous for two reasons. First, my right hon. Friend the Chancellor is persevering with dealing with the deficit, which is the greatest problem that we face. Politically, it is in the interests of the Labour party to claim that we are indulging in a tremendous campaign of cutting everything in sight. One of the problems that it faces is that it knows perfectly well—as do the public—that, if it had remained in power, as it very nearly did, it would have done much the same as us. It is also politically convenient for the Government, of course, to proclaim that they are taking difficult decisions, but we are probably not cutting public expenditure enough to keep interest rates low. We are cutting what would otherwise have been a runaway increase in the deficit, and that is very different indeed.
The decisions that the Chancellor faces are extraordinarily difficult, and he is conducting himself very well. I have watched him ever since he was a freshman Member of Parliament, serving on the Public Accounts Committee. What he is achieving, both on the deficit and on many other things, is important and courageous. The other brave thing that he has done today is deal with the issue of the 50p top rate of tax. I know that that is not necessarily populist. I listened to the speech by the Leader of the Opposition, which was very good, and afterwards I congratulated him on it. It was good politics, and it appealed to his people, but the question that the Labour party has to ask itself is: does it want its leader to give a speech that appeals to his core supporters, or a speech that addresses the real problems of the country? This is the problem in respect of the top rate income tax payers: the top 1% of taxpayers pay about 28% of total taxes and they are highly mobile in the way that they conduct their lives and their businesses, and simply imposing a 50p tax—which Tony Blair and Mandelson resisted year after year—does not actually achieve anything for the economy. It may be good Labour politics, but it does not achieve anything for the economy. As we heard from the Chancellor today, it is only giving us about £100 million. Therefore, although this measure may not be popular, it has to be taken if we are to revive entrepreneurship.
The task facing the Chancellor is very difficult and complex, but he has set about it in the right way. He is trying to close many of the tax loopholes. The difficulty here, however, is that we do not want the very rich just to bury their money in the ground. Instead, we want them to be “white knights”, to set up businesses and to become entrepreneurs. Indeed, many of the so-called tax avoidance schemes were designed by previous Governments to encourage the rich to invest in business.
The Chancellor has also taken a brave decision on child benefit. I was critical of his original proposals, although I understand why he suggested them. There was the overriding need to deal with the deficit, and his child benefit reforms were going to save £2.5 billion. There was also a desire to “detoxify” the Tory brand, and to attack higher income tax payers. There may have been some pressures within the coalition, too. However, we all know that the Chancellor’s original proposal would, as it were, have created a cliff edge and would have been fundamentally unfair, because the situation would have been very different for a family with one higher tax earner than for a family with two taxpayers whose earnings are just below the £41,000 limit.
The Chancellor has taken the courageous and right decision to try to deal with that problem, but we still have a long way to go, and I believe that a better way forward would be to have a tax allowance. That would solve the problem of the higher income tax payer family. In France, instead of getting child benefit, couples are given a family tax allowance, which is spread between themselves and their children, irrespective of their income. An adult counts as one unit of tax allowance, and children count as half units. Therefore, a married couple with two children are given three units-worth of tax allowance. As a result, the level of income at which they start to pay tax is higher than it would be in Britain. That system has the added advantage of addressing the perverse incentives against family life and couples staying together.
I will continue to argue that the Government must fulfil their pledge to recognise marriage in the tax system. Critics of my arguments often say, “Just a little tax break isn’t going to make people get married or stay married.” That is perfectly true, but what we currently have is almost a perverse incentive against family life. A married couple where one parent stays at home to look after the children are hugely more taxed than almost any other taxpayer. We do not want to create a tax break for marriage because we think that that alone will deal with the wider problems; we just want to right an injustice.
The Chancellor has remained true to the overriding need to have a fiscally neutral Budget and to attack the deficit, has demonstrated a determination to promote entrepreneurship even if that means taking unpopular decisions, and has courageously recognised that he may have made a mistake on child benefit and that he should try to reform the system in a more equitable way. Although the Budget may not be popular with everybody, it is certainly a good Budget, and the right Budget for the nation.