Debates between Rachel Reeves and David Gauke during the 2010-2015 Parliament

Mon 2nd Jul 2012
Mon 11th Jun 2012

Finance Bill

Debate between Rachel Reeves and David Gauke
Monday 2nd July 2012

(12 years, 4 months ago)

Commons Chamber
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David Gauke Portrait Mr Gauke
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Nobody will lose out in cash terms; that is the point.

Age-related allowances are complex and hard for older people to understand, as the Public Accounts Committee confirmed in a 2009 report. The same report also stated that too much emphasis is placed on older people having to prove their eligibility, resulting in erroneous claims and potential overpayments of tax. Furthermore, in March this year the Office of Tax Simplification published its interim report on its review of pensioner taxation in which it highlighted no fewer than nine complexities with the age-related personal allowance.

Half the people aged over 65 in 2013-14 will pay no income tax at all and are therefore unaffected by these changes. Those who will now not receive an age-related allowance will benefit from a £1,100 increase in the personal allowance, which represents the largest cash increase ever. At the same time, those who are affected by the withdrawal of age-related allowances will still see the total deductions they pay reduce significantly because we have retained the exemption from national insurance contributions for those of state pension age.

It is important to consider these changes to age-related allowances in the context of the wider support that the Government offer to pensioners. Only 40% of pensioners benefit from age-related allowances, about 50% are unaffected by the changes made by the clause because they pay no tax and will continue to pay no tax, and the remaining 10% have incomes above the taper limit for age-related allowances and are therefore unaffected by these measures.

Let us also remember that the triple lock ensures that each year, the basic state pension will be uprated by the highest of these: inflation, earnings or 2.5%. This April, the basic state pension increased by the consumer prices index inflation rate of 5.2%. That meant that there was an increase of £5.30 a week in the full basic state pension—the largest ever cash increase in the basic state pension. Under the previous Government’s plans, the basic state pension would have increased by only 2.8% from this April—an increase of only £2.85 per week. That means that the full basic state pension is £127 a year higher in 2012 than it would have been under the previous Government’s plans. Next year, a full basic state pension is forecast to be £130 a year higher than under the previous Government’s plans, and the year after that, it is forecast to be £133 higher.

Each year, more than 11 million pensioners will benefit from the introduction of the triple lock. An existing pensioner with a full basic state pension will gain more from the triple lock in each of the next three years than they will lose from the freeze in age-related allowances. The Institute for Fiscal Studies has said:

“Our analysis shows that they have lost considerably less from recent tax and benefit changes than any other demographic group. And over the past decade and more pensioner incomes have risen faster than those of the working age population.”

To conclude, the Government are making changes to ensure that there is a fair and competitive tax system. Some of them are controversial, but we should look at the evidence, not the Opposition’s rhetoric. The 50p rate is not sustainable. The introduction of the triple lock on state pensions means pensioners continue to be better off. These changes are good for our long-term tax revenues, good for our economy and good for the UK as a whole. I ask the Opposition to seek leave to withdraw the amendment.

Rachel Reeves Portrait Rachel Reeves (Leeds West) (Lab)
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It is good to have plenty of time to wind up for the Opposition. We will press for a vote on amendments 1 and 23 this evening, because as today’s debate has confirmed for anyone who was still in any doubt, this is not only an omnishambles of a Budget, as my hon. Friend the Member for Livingston (Graeme Morrice) said, but a flawed and unfair Budget.

We have heard contributions about the hardships that the Government’s economic failure and unfair austerity measures are causing for our constituents. My hon. Friend the Member for Hackney South and Shoreditch (Meg Hillier) talked about the cuts beginning to bite. She rightly said that pensioners are the victims and millionaires are the victors from the Budget. My hon. Friend the Member for Wansbeck (Ian Lavery) said that the tax cut for millionaires is worth more than the money that most of our constituents take home in a year. The hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) spoke about a tax cut for the mega-rich that leaves a bad taste in the mouth.

Instead of taking serious steps that might repair the damage that has been done, the Chancellor and his Ministers have turned from their failed experiment in expansionary fiscal contraction and resorted to the notorious Laffer curve. As my hon. Friend the Member for Brent North (Barry Gardiner) said, they are testing that economic philosophy to its limits. It is their latest excuse for an economic policy that rewards those who are already very wealthy and is the last refuge of a Government who have lost any sense of purpose beyond the protection of privilege.

The argument that cutting tax for the very richest is the only way of improving the economic prospects for the rest of us was made by the hon. Members for Amber Valley (Nigel Mills) and for Dover (Charlie Elphicke). They were suggesting that cutting taxes for the rich is what makes them work harder, but that cutting benefits for the poor is what gets them out of bed in the morning. They were saying that although these policies will hurt their constituents, they will vote for them anyway. I am sure that their constituents will sit up and take notice.

It is the same old Tories dusting down the same old trickle-down theories. They did not work in the 1980s and they will not work today. As my hon. Friend the Member for Edinburgh East (Sheila Gilmore) said, the Government seem to think that if they cut taxes for the richest, somehow the rest of us will be the beneficiaries. Nothing could more clearly demonstrate the Government’s perverse priorities than the fact that, when ordinary families are going through the toughest times in living memory, clause 1 of chapter 1 of part 1 of this Finance Bill gives a £3 billion tax cut to the richest 1% of the population, and the rest of the Bill is peppered with dubious means of making other, far less fortunate people in society pay for it.

Among those means, the largest and most flagrant is the abolition of the age-related allowance. The Government call it a tax simplification; we call it a tax grab from pensioners with occupational pensions of little more than £5,000 a year. As my hon. Friend the Member for Wansbeck said, it will cost pensioners £83 and people coming up to retirement £323.

May I just say how disappointing it was—

Changes to the Budget

Debate between Rachel Reeves and David Gauke
Monday 11th June 2012

(12 years, 4 months ago)

Commons Chamber
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Urgent Questions are proposed each morning by backbench MPs, and up to two may be selected each day by the Speaker. Chosen Urgent Questions are announced 30 minutes before Parliament sits each day.

Each Urgent Question requires a Government Minister to give a response on the debate topic.

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Rachel Reeves Portrait Rachel Reeves
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Given the number of U-turns that the Government have made in the past two weeks, it is difficult to know where to start. Will they now change course on the biggest mistakes in the Budget—cutting tax credits for working families, the granny tax and cutting tax for millionaires while asking ordinary people to pay more? The country is crying out for the Government to change course and to get a grip on their policies, which dug us into this hole and this recession.

David Gauke Portrait Mr Gauke
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The hon. Lady says that the Government were desperate for money-making measures. Why does she think we needed such measures? She might have noticed that her party left the biggest peacetime deficit we have ever faced. The extraordinary thing about the Labour party is that it always believes that there is a magic money tree that we can get money from. I am afraid, however, that we have to take steps to reduce the deficit. Even with these changes, we remain on the course that we set out. This was a fiscally neutral Budget, and we are not taking risks with the public finances, which is the U-turn that the Opposition want us to take.

The hon. Lady asked how a Budget could be changed and why we had departed from what it set out to do. I should like to remind the House what happened four years ago. In 2007, the then Chancellor of the Exchequer announced the doubling of the 10p rate. A year later, his successor had to come to the House—not in a Budget, but weeks later—and set out additional tax cuts of over £3 billion. They had got their policy wrong and they had destroyed their credibility by doubling the income tax rate for the poorest earners in this country. That is an example of a Budget shambles.

Finance (No. 4) Bill

Debate between Rachel Reeves and David Gauke
Thursday 19th April 2012

(12 years, 6 months ago)

Commons Chamber
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Rachel Reeves Portrait Rachel Reeves
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We do not know what the economy will look like in three weeks, let alone in three years. The Government’s choices are making our economic prospects worse and worse. In the past year, the Office for Budget Responsibility has had to revise down its forecast for UK growth three times. It is now expected to be a third less than it was a year ago. We will publish our manifesto before the next election, but it will be very different from Government Members’ manifestos because we prioritise hard-working families, not a tax cut of £40,000 for 14,000 millionaires. That is why we will vote against the provision this evening.

David Gauke Portrait The Exchequer Secretary to the Treasury (Mr David Gauke)
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On the Government’s treatment of pensioners, the hon. Lady mentioned uprating the state pension. She will know that we have introduced a triple lock so that the state pension increases by the higher of 2.5%, CPI or earnings. She will also know that, according to the plans we inherited, pensions would rise in line with earnings. As a consequence of the increases by CPI rather than earnings, the state pension has increased by £127 more a year than it would have done under the plans that we inherited. Does she accept that?

Rachel Reeves Portrait Rachel Reeves
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Not many Governments would want to take credit for the fact that inflation has reached 5.3%. Pensions have had to rise by just over £5 to compensate for the increase in the cost of living for pensioners. The Government increased VAT and took no action to tackle excessive gas and electricity bills, and that is why inflation is so high for ordinary working families and pensioners.

--- Later in debate ---
David Gauke Portrait Mr Gauke
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I perhaps forlornly hoped that the hon. Lady would concede the point that the state pension has increased more under us than it would have done under the previous Government’s plans, which would not have increased it in line with the rate of inflation.

Rachel Reeves Portrait Rachel Reeves
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That is like suggesting that if inflation was 10% and the Government had to increase pensions by £10 a week to keep pace, pensioners should celebrate and thank them. Of course they will not thank them because the increase in pensions only keeps pace with the rising cost of living. If the Government want to take credit for record high inflation, be our guest.

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David Gauke Portrait Mr Gauke
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My hon. Friend is right to remind the Committee of that.

We must ask ourselves whether pensioners are disproportionately affected by Government policies. The answer is clearly no. The evidence is very clear on that. After the reforms, does the tax system treat pensioners unfairly? No. By definition, having one personal allowance across the board, regardless of age, is not unfair on pensioners. Is there a strong, principled case for different personal allowances based on age? We have not heard that case made today, other than the fact that Winston Churchill thought it was a good idea in 1925. The official Opposition’s policy is to tell everyone under 65 that they should have a lower personal allowance than those over 65.

Clause 4 supports the Government’s long-term aim of simplifying the tax system by creating a single personal allowance. It removes the complicated tapering system, making personal allowances easier to understand. In the longer term we will have a single, generous personal allowance for everyone while ensuring that no one is a cash loser. I ask the hon. Member for Leeds West (Rachel Reeves) to withdraw the amendment.

Rachel Reeves Portrait Rachel Reeves
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If you believe what the Exchequer Secretary said, Mr Williams, you would think that pensioners would have come to Parliament today to thank the Government for everything they have done for them. The reality is that pensioners up and down the country feel seriously let down by the Government. In contrast to the out-of-touch speech we heard from the Exchequer Secretary, we have heard concerns from Opposition Members, including my hon. Friends the Members for Wirral South (Alison McGovern), for North Ayrshire and Arran (Katy Clark), for Livingston (Graeme Morrice) and for Edinburgh East (Sheila Gilmore), and we heard a contribution from the hon. Member for Banff and Buchan (Dr Whiteford). They stick up for their constituents, listen to them and understand their concerns that pensioners will lose £83 this year and those who will retire next year will lose £322, with very little notice, and that is after many other hits, including the increase in VAT, and despite the fact that pensioners face additional costs, such as heating, compared with other people, and that the Government have done so little to consult on these changes before they are introduced.

The fact is that this tax raid on pensioners is being used to fund a tax cut for millionaires—a tax cut worth £40,000 for 14,000 millionaires. That shows where the priorities lie for Government Members. The priorities for Opposition Members lie with ordinary families, young people and pensioners, who are feeling the full impact of the Government’s policies. All Members now have a chance to show where their priorities lie; are they with millionaires or with pensioners? Will Government Members listen to the leadership of their former leader, Winston Churchill, who introduced the age-related allowance in 1925, or to their current leadership, the Prime Minister and the Chancellor, who are making a tax grab on pensioners? It is up to Government Members to decide how they will vote, but pensioners up and down the country will be watching this afternoon to see where their priorities lie, because the reality is that the Government are introducing these reforms because they want to help millionaires and hurt pensioners. We will vote for amendment 65 and against clause stand part.

Finance (No. 4) Bill

Debate between Rachel Reeves and David Gauke
Monday 16th April 2012

(12 years, 6 months ago)

Commons Chamber
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Rachel Reeves Portrait Rachel Reeves
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I want the wealthy to pay their fair share in the deficit reduction, which is why I shall be voting this week against a cut in the taxes for 14,000 millionaires. Figures from the Institute for Fiscal Studies show that in Budget 2002—a Labour Budget—anti-avoidance measures were worth £1.7 billion. In Budget 2003—a Labour Budget—there were £1.7 billion of tax avoidance measures, and in Budget 2004, £1.7 billion-worth of tax avoidance measures—I could go on. The point is that in the Budget this year—a Conservative Budget, with a little bit of help from the Liberal Democrats—tax avoidance measures are worth £0.8 billion, lower than in all but two of the last 10 years. The idea that it is a tax avoidance Budget just does not stand up in the statistics. The Institute for Fiscal Studies knows it, so perhaps Members on the Government Benches should look at those numbers. Of course we should cut down on tax avoidance, but we should not then compensate the rich by giving them a tax cut worth £3 billion. If the right hon. Gentleman really wants to cut down on tax avoidance and ensure that the wealthy pay more, I hope he will join us in the Lobby to vote against a tax cut for the richest in society.

David Gauke Portrait The Exchequer Secretary to the Treasury (Mr David Gauke)
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The hon. Lady will be aware that in last year’s Budget, there was a measure to tackle tax avoidance through disguised remuneration. She will also be aware that her party voted against the measure in a Finance Bill last year. Does she regret that?

Rachel Reeves Portrait Rachel Reeves
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In Budget 2011, there was £1.1 billion-worth of tax avoidance measures, which is less than half the amount spent on such measures in Labour Budgets. We want more wealthy people to pay their fair share, but nothing in the Budget ensures that. The Government need to tackle tax avoidance, but they should not compensate for that by giving a tax cut to the wealthiest in society.

The Chief Secretary to the Treasury said about the 50p rate:

“The idea that we are going to shift our focus to the wealthiest in the country at a time when everyone is under pressure is just in cloud cuckoo land”,

but it turns out that the Liberal Democrats have joined their Conservative coalition partners in cloud cuckoo land. I hope that the Chief Secretary is enjoying himself there, but I am sure he had hoped to cover his humiliating climbdown by pointing to the benefits to lower and middle-income earners from the increase in the personal allowance. However, as I said in my intervention on him, the Institute for Fiscal Studies has made it clear that the gains from the policy are cancelled out many times over by the losses suffered by ordinary families as a result of the Government’s tax hikes, benefit cuts and tax credit changes. The Government are giving with one hand and taking much, much, more from ordinary families, pensioners and young people with the other.

The cover story that the wealthy will pay more in other ways is unravelling day by day. We have already seen that in the House this afternoon. The cost of the cut to the top rate of income tax is 10 times higher than the amount of money raised by the cap on tax reliefs. I hope we all agree that more must be done to reduce genuine tax avoidance, but that should be a standard feature of every Budget and every Finance Bill. I direct the Chief Secretary to slide 9 of the assessment that the Institute for Fiscal Studies has made of the Budget. It shows that between 2002 and 2009, the Labour Government reduced tax avoidance by over £12 billion, while this Budget reduces tax avoidance by a mere £800 million—less than Labour’s annual average, and less than all but two other Budgets in the past decade. That is before one takes into account the fact that included in the Government’s definition of tax avoidance is tax relief for donations to charities including UNICEF, Macmillan Cancer Support, the Royal National Lifeboat Institution, Oxfam and many others. The fact that the Government cannot tell the difference between that and real tax avoidance shows how incompetent and out of touch they are.

Living Standards

Debate between Rachel Reeves and David Gauke
Monday 5th March 2012

(12 years, 8 months ago)

Commons Chamber
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David Gauke Portrait Mr Gauke
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I am grateful to the hon. Lady for accepting and confirming that all the measures that will be put in place in 2012-13—which we could implement or not implement—are progressive.

Rachel Reeves Portrait Rachel Reeves
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Can the Minister tell us whether the measures introduced by his party are progressive or regressive?

David Gauke Portrait Mr Gauke
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All the measures that will be put in place in 2012-13 are being implemented by this Government. That is the point. It is impossible to disaggregate those measures. They are all going to be put in place, and we are responsible for all of them. If we had wanted to reverse some of them, we could have done so, but we did not.

Of course, none of what we are doing ignores the fact that this will be a tough year for households across the board. We know that that is the case, and it is our reason for going even further to support families and businesses throughout the country.