Finance (No. 2) Bill

Andrew Smith Excerpts

3rd reading: House of Commons
Tuesday 25th April 2017 Commons Chamber

[Kirsty Blackman]

I agree that it is a real problem that this increased minimum wage does not apply to people under 25. Just because a person is under 25 does not mean they are doing any less of a job than a person over 25, and the minimum wage should apply to them just as much as to those who are older.

The other issue is that the tax credit changes more than balance out the extra money people are getting from the increased minimum wage and personal allowance. People at the bottom of the pile are worse off as a result of the Government’s decisions. Despite the Government’s talk about how great the new personal allowance and the new minimum wage are, they have to be considered in context. People who work are worse off as a result of the tax credit changes.

More generally, the Government have made a few suggestions on the taxation of self-employment, some of which have been withdrawn and some of which have not. They intend to try to equalise the taxation of employment and self-employment. However, what is missing is that people in self-employment do not receive the same benefits as people in employment, such as maternity leave and holiday entitlement. I have argued before and will argue again that if the Government are making changes to self-employment, they need to do so in the round. The need to stop this piecemeal tinkering and consider the whole situation. They need to do a proper review and come back with the results, and then consult on any changes. Rather than pulling rabbits out of hats—changing national insurance contributions with very little consultation, for example—they need to consult properly on how taxation should look for individuals, whether they are employed or self-employed.

I appreciate that the Government are undertaking the Taylor review, but I am not sure it goes far enough. I would like to see the Taylor review, or a future Government review, take self-employment into account in the round by considering all the factors that face the self-employed. We need to remember the changes in the self-employment landscape in recent years. We have seen a massive increase in the number of women and older people in self-employment, and the Government’s changes do not take into account the changes in that landscape. I would like to see a holistic approach, rather than a tinkering approach.

That is all I have to say on this group but, again, I welcome the Government’s withdrawal of the dividend tax threshold changes.

[Mr Andrew Smith (Oxford East) (Lab)]

I also congratulate the hon. Member for Copeland (Trudy Harrison) on a fine maiden speech and thank her for her well-deserved compliment to her predecessor on his service. She spoke with passion, wit and understanding of her beautiful constituency, as well as of Peter Rabbit. None of us envies her speedy transition from by-election to general election, but I do congratulate her.

I made my maiden speech to this House on the remaining stages of the 1987 Finance Bill, so there is a certain symmetry in my making my last remarks on this one. On the substance of the Bill, it is too often overlooked—the hon. Lady talked about balancing public spending—that, although the Conservative party often talks about balancing the budget, the last Government to do so were Labour in 2001-02. Right now, it makes sense to invest more in productive infrastructure, training and public services, with action to combat poverty and to secure Brexit terms that enable our country to grow and flourish. I wish we had a Finance Bill for social justice that stands up for the many, not the few. That is what we need a Labour Government for.

It has been a privilege to be an MP, in and out of government, and I thank the staff of the House, the Library, those who keep us safe and you, Mr Hoyle, and your colleagues. I am grateful to all colleagues and wish them well for the future.

I would like to say a huge thank you to all those who have helped me serve the wonderful constituency of Oxford East for 30 years; my family and friends; my neighbours in Blackbird Leys; our party members and supporters; my trade union, the Union of Shop, Distributive and Allied Workers; my office staff and party organisers across the years; and, most of all, my constituents. Thank you.

[The Chairman of Ways and Means (Mr Lindsay Hoyle)]

I wish you well in your retirement.

Enterprise Bill [Lords]

Andrew Smith Excerpts

Wednesday 9th March 2016 Commons Chamber

[Brandon Lewis]

I agree with my hon. Friend; I think he is right. One of the things I have been most passionate about, as have the Secretary of State, the Chancellor and the Prime Minister, during the years of coalition as well as in this Parliament, is devolving power, and we just wish our friends in Scotland believed in devolving power, too. It is why organisations representing independent businesses like garden centres are so keen to benefit from this growth.

[Mr Andrew Smith (Oxford East) (Lab)]

Let me take the Minister back to the important point made by his hon. Friend the Member for Enfield, Southgate (Mr Burrowes) in a measured speech in which he reminded us of the Prime Minister’s clear commitment just weeks before the general election:

“I can assure you that we have no plans to relax the Sunday trading laws. We believe the current system provides a reasonable balance”.

Does the Minister not think it matters if the Prime Minister says one thing just before a general election, if a policy is not in the Conservative manifesto, but the Government then do something completely different afterwards?

[Brandon Lewis]

I appreciate that the Labour party is not looking to drive economic growth, but our manifesto is clear that we want to see it, and the Prime Minister made it very clear at this very Dispatch Box last year that we thought it was time to review Sunday trading laws in the light of how things have moved on.

Income Distribution and Taxation

Andrew Smith Excerpts

Wednesday 9th April 2014 Westminster Hall

[Mr Mark Harper (Forest of Dean) (Con)]

I am pleased to serve under your chairmanship, Mr Weir, and to welcome my hon. Friend the Member for Loughborough (Nicky Morgan), who is having a double personality day. She started as Economic Secretary and ended as Financial Secretary. I congratulate her on her well-deserved promotion, and I am very pleased that she is still able to respond to this debate. I wrote to her earlier today to congratulate her on her innovative way of avoiding responding to my debate, but she is stuck with me for the next 29 minutes or so.

I secured the debate because, although I touched on the matter briefly in my short contribution to the Budget debate, it was, as you know, Mr Weir, time limited, and I did not have a chance to make all the points I wanted. In the debate running up to the Budget, there was a lot of discussion about “middle-income taxpayers” and what that meant. I want to set out what I think the Government’s priority should be and congratulate them on landing the income tax cuts in the right place on the income scale.

In the run-up to the Budget, a number of newspaper articles—there was one in The Guardian—referred to middle-income earners being dragged into the 40p tax bracket, but that is not a sensible use of “middle income”. Even the Leader of the Opposition used the phrase, saying that

“if you are in the middle, paying 40p, you should be pleased to pay more”.—[Official Report, 19 March 2014; Vol. 577, c. 797.]

He was referring to what he said was someone else’s argument.

In the Labour party’s list of 24 so-called Tory tax rises, four of them are changes to the higher rate threshold. It seemed slightly odd for the Labour party to complain about ensuring that those on higher incomes paid their fair share in dealing with the deficit. While I am touching on that list, it is interesting to note that the spare room subsidy, which is a housing benefit issue—the Opposition insist on calling it a tax—was not on it. That was a very good demonstration of the fact that even they accept in their heart of hearts that it is not really a tax, even though they keep trying to call it that.

That was an aside, but the point I wanted to make about 40p taxpayers is that I am not saying that they are rich; they are not. Equally, they are not in the middle. Looking at the 2013-14 tax year, someone would pay 40p tax only if they had £32,010 of taxable income, which is on top of a £9,440 personal allowance. They would have to earn a gross income of £41,450 to pay that tax rate. In 2011-12—the most recent year for which the detail is available—the income distribution figures show that a higher rate taxpayer is in the top 14% of income earners. For that year, the median income was £20,300. Some helpful projections have been done using the Office for Budget Responsibility’s economic and fiscal outlook. They show that the median income was £21,000 in 2012-13 and £22,200 in 2013-14. That is only just more than half the income someone would have to earn to pay the 40p tax rate.

If I look at the level of income in my not untypical constituency—these figures are for 2011-12, the latest ones available that are broken down by parliamentary constituency—the mean income of all taxpayers is £24,300, and the median income is only £18,800. If the overall national figures have gone up by some 10% since 2011-12, we can use that assumption with the constituency figures, but that would take the median figure to only a little over £20,000. That figure is for total income. If we look at how that is split between the self-employed, the employed and pensioners, the figures present a different picture. However, it is clear that the median taxpayer is not earning anything like enough to pay the 40% tax rate; they are paying basic rate tax. That is why I thought the Chancellor’s Budget judgment was right.

I even looked at parliamentary constituencies that people would generally accept as having a higher than average number of people earning good incomes. A piece of data that is available from the Office for National Statistics shows that even in constituencies with a high level of mean income—Kensington, Cities of London and Westminster and Chelsea and Fulham—the numbers are clearly driven by a small number of well-remunerated people. The median income in those constituencies is: £37,900 in Cities of London and Westminster; £36,200 in Kensington, and £34,300 in Chelsea and Fulham. Even in those constituencies, the median taxpayer is not paying anything close to 40% tax.

The focus should be on delivering tax cuts for the lower paid and those on more modest incomes and that is what the Chancellor did in his Budget. He made it clear that the personal allowance was going to rise in this current tax year, which has just begun, to £10,000 and next year it rises to £10,500, which will lift more than 3 million of the lowest paid out of income tax altogether. He also confirmed, rightly, that the higher rate threshold will rise a little bit as well, for the first time in this Parliament, which means that everyone on incomes up to £100,000 will benefit from some tax cut, but obviously the main benefit is for those on a lower rate.

The list of tax rises that the Labour party put out referred to the higher rate income tax threshold cuts earlier in this Parliament, which were equitable and made to ensure that those significant rises in the personal allowance did not disproportionately benefit higher rate taxpayers. Of course, if the personal allowance is increased and the higher rate threshold is not changed, someone on 40% tax has income moved out of that band into the basic rate band and gets a bigger benefit than someone on basic rate tax. That would be wrong. The judgments that we made earlier in this Parliament, when we had to make difficult financial decisions, to share the pain and have the burden on those with the broadest shoulders, were right. I am pleased that the Chancellor confirmed that.

By virtue of increasing the allowance, the Chancellor was able to show that, looking at this Government’s tax arrangements, compared with the previous Government’s policy, everybody earning up to £100,000 is better off. They have all had a tax cut, but the tax cuts are more focused and bigger for those on lower earnings.

[Mr Andrew Smith (Oxford East) (Lab)]

I congratulate the hon. Gentleman on securing this debate on an important issue. I resisted intervening on the bedroom tax and so on because I wanted to make this point. Does he share my concern, notwithstanding what he said about raising the allowance, that the impact of the tapers on people in receipt of universal credit will be such that, for somebody just above the tax threshold, the rate of withdrawal on both a first and second earner in a family will be as high as 76%? Is there not a danger that that gives people a perverse incentive to work fewer rather than more hours, because they do not reckon that they are being rewarded for the extra hours, or to do undeclared work?

[Mr Harper]

The right hon. Gentleman is right to drawn attention to the tapers and the withdrawal of benefits as people earn income—of course, they are high—but this issue was raised during the Budget debates. However, the fact is that, under universal credit, the withdrawal rates and the tapering arrangements mean that there is a smaller rate of withdrawal of benefit than under the existing levels of benefit. I am sure the Minister will correct me if I am wrong; this is not an area that I have studied in detail. The issue the right hon. Gentleman raises is important, but it is always a challenge to deal with the withdrawal of income-related benefits and to be careful that the effective marginal rate for people is such that it is always worth their while working. Ideally, we want to get that marginal rate as low as possible, but it is expensive to drive it down to a low level. My understanding is that, under universal credit, those withdrawal rates of benefit are lower and therefore more encouraging of people to work, either more hours or in the first place, than under the existing combinations of income-related benefits.

[Mr Smith]

My understanding is that the rates are higher for people working more hours, for 35 hours or more. The hon. Gentleman is right in that the rates are lower for people working fewer hours. That is my worry—the perverse incentive for people to work less.

[Mr Harper]

If I am picking that up correctly, the right hon. Gentleman is saying that at lower levels of earning, or for people who work fewer hours, the effect of universal credit is—

[Mr Smith]

I should correct that. It is not that the rate is lower; it is that people will be better off working fewer hours, as compared with the position under tax credits, whereas those who are working 35 hours or more will be slightly worse off under universal credit than they would have been under tax credits. The withdrawal rate is 76%, just above the tax threshold, under universal credit.

[Mr Harper]

I cannot answer the right hon. Gentleman’s detailed question, because I have not studied the matter, but the other thing that he needs to do—I am not sure whether he has incorporated this into his judgment—is look at the interaction of the tax changes that we have made with the benefit system. Over this Parliament, there will be a significant increase in the personal allowance from what it was in 2010-11 when we came to power, and what it will be when this Parliament finishes, from something in the order of £6,000 or £6,500 to £10,500. A lot of people on lower incomes, such as those on the minimum wage, are moved out of the taxation system altogether. Previously, people could be on a relatively modest income and paying tax, but at the same time getting various income-related benefits.

I think that I have set that out carefully, but if I have not, the Minister will do so in her response. Otherwise, because the debate is not about universal credit and she might not have all those facts at her fingertips, I am sure she is happy to write and to set it out in detail later. I am, however, grateful for the point made by the right hon. Gentleman.

Zero-hours Contracts

Andrew Smith Excerpts

Wednesday 19th March 2014 Westminster Hall

[Alison McGovern]

My hon. Friend has pre-empted exactly what I am going to say. It is interesting that a Department for Business, Innovation and Skills Minister will respond to the debate, but we could do with having the Health Minister here, given how rampant zero-hours contracts are in the care sector. We could also do with the Minister of State, Department for Work and Pensions, the right hon. Member for Wirral West (Esther McVey), who has responsibility for employment, because I want to know exactly how many people we have forced to take jobs with zero-hours contracts to get them off the claimant count.

[Mr Andrew Smith (Oxford East) (Lab)]

I join the congratulations to my hon. Friend on securing this enormously important debate. On the care sector, does she agree that such vulnerable contracts are exactly the opposite of what we need to build the status, training and career structure of care workers? Is it not a scandal that care workers are often not paid for travelling between one job and another, and are therefore being paid below the minimum wage for the hours they are working? Does Her Majesty’s Revenue and Customs not need to start enforcing that?

[Alison McGovern]

My right hon. Friend has hit the nail right on the head. There is no better word for that than “scandal”. I will come on to say a few things about the care sector. He and I are as one in thinking that we need to develop the skills of our care work force.

--- Later in debate ---

[Jenny Willott]

I completely agree. The behaviour that the hon. Gentleman describes is not right and is not appropriate for a responsible employer. I am sure that hon. Members on both sides of the House completely agree with that.

Some individuals have been working regular hours for long periods only to find that they are “zeroed-down”—their hours are brought down—when demand falls, perhaps due to the loss of an order. Clearly, that dramatic change in working hours and the resultant income loss will have a significant impact on the individual, especially if they are the only person working in the household. When individuals have their income supplemented by benefits, an increase or decrease in hours and income can have quite a significant impact on their benefits, which can be very difficult to manage in terms of household income.

Hon. Members raised issues about the link between jobseeker’s allowance and zero-hours contracts. Clearly, the Government’s priority is to help people on benefits to move off them and into work as soon as possible. However, as the hon. Member for Wirral South highlighted, some media reports suggest that people claiming jobseeker’s allowance are being told that they must apply for vacancies that are advertised as zero-hours contracts. I must stress that that is not the case. In such cases, someone’s benefit would not be sanctioned. DWP decision makers cannot mandate claimants to apply for zero-hours contracts, although they are obviously free to apply for such a job if it would suit them. The uncertainty about the hours of work offered by the employer and about the amount earned and so on can present difficulties for individuals, so someone would not be sanctioned for not applying for one of those jobs.

It is very important that individuals make informed choices when applying for or accepting work, and employers must ensure that both job adverts and employment contracts are transparent. People have the right to know up front that a contract does not guarantee work, if it is a zero-hours contract, so that they know what they are signing up to. The evidence that we have received in the Department is that that certainly is not the case for everyone on a zero-hours contract, and that needs to be resolved.

Hon. Members have also raised issues about the care sector and the entitlement to payment for the time spent travelling between jobs. I want to be clear that employers must ensure that their workers are paid at least the national minimum wage for the hours that they work. Time spent travelling on business, including between house calls, counts as time worked for minimum wage purposes. Where the travelling time is time for which the minimum wage should be paid, any associated expenditure incurred by the worker in respect of that travelling is classified as being in connection with the employment. A worker who is paid at minimum wage rates would therefore need to be reimbursed the expenses for the travelling in order for the employer to be in compliance with minimum wage legislation.

[Mr Andrew Smith]

What will the Government do to ensure that HMRC’s enforcement unit steps up enforcement in this area of the minimum wage, because it is being abused?

[Jenny Willott]

I was about to come to exactly that point. We are aware that low pay is an issue for workers, particularly in the care sector, as hon. Members have highlighted. As the right hon. Gentleman just pointed out, HMRC enforces the minimum wage on behalf of the Department for Business, Innovation and Skills, and it has been conducting enforcement activity in that sector. In November, it published a social care evaluation, which highlighted a very worrying level of non-compliance. In 51% of the cases that it inquired into, the minimum wage was not complied with, and it identified more than £400,000 of pay arrears.

The Government are trying to improve compliance partly by significantly increasing the penalties so that they act as a more effective deterrent, and HMRC is currently targeting enforcement activity on the care sector in particular. We have also revised the naming-and-shaming scheme—the most recent batch of names was published a couple of weeks ago—and it is now much simpler to name and shame employers that break national minimum wage law. We are trying to ensure that we are taking more targeted action, but also that the penalties are greater, both financially and in terms of naming and shaming, so that they will act as a more effective deterrent.

The hon. Member for Wirral South asked about working across Government on the issue of zero-hours contracts and procurement. Officials have spoken with the Cabinet Office in relation to Government contracts, procurement and zero-hours contracts. We are also working with the Department of Health regarding the use of zero-hours contracts in social care. The discussions are ongoing, and the information gathered during them is also being fed into our consultation response. This is a very complicated issue and, as hon. Members have highlighted, it is of great importance to tens of thousands of people throughout the country. We had more than 36,000 responses to the zero-hours contracts consultation, which closed last week, so people clearly feel very strongly about the issue. We are looking at the responses to the consultation and will publish our response very shortly. I hope that that will respond more broadly to some of the issues highlighted by hon. Members today. I congratulate the hon. Member for Wirral South on securing the debate, because it is a very important issue. We all have constituents who have it right at the top of their agenda, and the Government are working on it.

Taxation (Living Wage)

Andrew Smith Excerpts

Tuesday 22nd January 2013 Westminster Hall

[Robert Halfon]

My hon. Friend has an interesting idea, which I would like to explore further, but I believe that the focus of all the resources that the Treasury has, which of course are not much, should be on restoring the 10p rate, for the reasons that I will go on to describe. I have argued that we need a solution for everyone, not just for the lucky few. That is why I was pleased to see Kevin Maguire in The Daily Mirror today supporting the 10p campaign.

[Mr Andrew Smith (Oxford East) (Lab)]

I congratulate the hon. Gentleman on securing this debate on an important subject. I want to take him back to the point that he was making about tax credits supposedly allowing employers to pay lower wages. Presumably the basis for that argument is that tax credits raise the take-home pay for the worker at no cost to the employer. However, why does he not employ the same argument to the tax reduction that he is advocating, which again will raise the take-home pay of workers? In a properly competitive labour market, would that not allow employers to pay less?

[Robert Halfon]

That is where the philosophical difference between the right hon. Gentleman and me lies; I believe that we need to move away from a handout society, in which people’s taxes are recycled to hand out to various groups, to a hand-back society, in which people are handed back their own money through the tax system.

Some people on the right, especially in the think-tank world, oppose the 10p tax rate on the grounds that it is not radical enough. They say that it might undermine the case for a flat tax in some future Parliament. The problem with that—again, as the IFS has set out—is that a flat tax would be deeply regressive and it would be hard to defend as fair. While that remains true, a flat tax is unlikely to happen.

For example, the IFS has shown that merging income tax and national insurance contributions to a flat rate would literally take from the poor and give to the rich, unless the state was shrunk to a size that is politically impossible. Where I agree with people on the right, and with thoughtful commentators such as Ryan Bourne from the Centre for Policy Studies, is that the Government must do much more to generate support for broader tax cuts. My point, however, is that surely the best way to achieve that is to show that tax cuts are moral—to use a Blairite phrase, “for the many and not the few”—and that they will help millions of hard-working people, not just millionaires.

--- Later in debate ---

[Martin Vickers (Cleethorpes) (Con)]

I hope not to be as challenging for the Hansard reporters as my Welsh colleague, my hon. Friend the Member for Aberconwy (Guto Bebb).

It is a pleasure to serve under your chairmanship, Mr Robertson. I congratulate my hon. Friend the Member for Harlow (Robert Halfon) on securing the debate. He is a worthy champion of such issues and I hope to give him my support.

Although my Cleethorpes constituency is best known as the premier resort of the east coast, it is a highly industrial area that takes in a large section of the Humber bank. Although there are highly skilled and well-paid jobs in some of the factories, my constituency, and indeed the region, is an area in which pay is considerably below the national average.

Seaside resorts are heavily reliant on part-time, often seasonal work. In some cases, that is not necessarily what people would like, but it is what is available. For other people, the work fits perfectly with their family responsibilities and is a useful supplement to the family income. The Conservative party has traditionally been the low-tax party, and so it should and must remain, but it must be low tax for all, with the emphasis on the low-paid. The coalition Government have done an awful lot in that respect, most notably through the massive increase in personal allowances. However, as my hon. Friend the Member for Harlow pointed out, we risk jeopardising much of the political benefit if we allow our opponents to paint us wrongly as the party of the rich and privileged.

[Mr Andrew Smith]

The hon. Gentleman refers—rightly, I am sure—to the importance of part-time, often low-paid workers in his constituency, but does he accept that the coalition’s withdrawal of working tax credit from part-time workers has hit those workers very hard and represented a disincentive to work, which is contrary to his argument?

--- Later in debate ---

[Catherine McKinnell]

I accept that the Government have increased the personal allowance, but their other policy changes have impacted on those very people whom they purport to be helping, with a real-terms effect on families up and down the country. In fact, the hon. Member for Cleethorpes admitted that his constituents are certainly not happy about some of the changes and their impact. I know for certain that my constituents would agree, but the shocking fact is that almost 5 million people across the UK are currently paid less than the living wage, and 3 million of them are women. The Government may believe that the way to motivate people on low incomes is to pay them less, and the way to motivate those on the highest incomes is to pay them more, but the Labour party believes that this is an issue of dignity at work and social justice.

[Mr Andrew Smith]

My hon. Friend is doing a very good job of batting off the attacks from Conservative Members. Does she agree that the hon. Member for Aberconwy (Guto Bebb) must not be allowed to rewrite history? The Conservative party argued vigorously against not just the level of the minimum wage, but its very introduction. It said that it would destroy jobs, but after it was introduced, 1 million extra jobs were generated in the economy. I think the Government now accept the point, but the hon. Gentleman must not be allowed to get away with rewriting history.

[Catherine McKinnell]

I thank my right hon. Friend for making that important point. I said that there was fierce opposition, particularly from Conservative Members, when the national minimum wage was introduced, and he has given some colour to the debate that took place at that time. We are moving on to the next stage, and the Labour party is backing the living wage campaign, which is a perfect example of how we can deliver a one-nation economy in which everyone has a stake, and prosperity is fairly shared. That is why Labour councils are delivering a living wage throughout the country, despite straitened economic circumstances for many and in the face of swingeing Government cuts. We believe in doing the right thing for low-paid employees. Those local authorities include Islington, Lambeth, Wigan, Camden, Oxford, Preston, Southwark, Hackney and, from November last year, my city council, Newcastle, which is meeting the cost of paying the living wage entirely from a reduction in management costs.

Labour councils are paying a living wage because it is a powerful symbol of the change that the Labour party wants to see in our economy. We do not want the race-to-the-bottom approach backed by the Government, who seek to erode workers’ rights and make it easier to sack staff. We want to aim for a higher skilled, higher waged and more productive economy that can genuinely compete on the global stage so that workers are not forced into several jobs with no chance of spending proper time with their families.

It is vital that the Government, both central and local, take a lead, but it is not enough, as hon. Members have said, for just the public sector to implement the living wage. It is great news that around 140 private sector employers have taken that step, including notable firms such as KPMG, Barclays, Deutsche Bank, PWC, Lush, Westfield shopping centres and InterContinental Hotels Group. Many of those firms have been clear about the positive impact that paying a living wage has had on their companies. KPMG has reported higher employee morale, motivation and productivity alongside a reduction in staff turnover and absenteeism since the policy was implemented.

[Mr Andrew Smith]

Does my hon. Friend agree that the really important commitment is not just that large organisations commit to the living wage, but that they require their contractors and subcontractors to do so? Otherwise there is a risk that they will simply outsource their low-paid jobs while taking credit for paying the living wage to their direct employees. We want everyone to have it.

[Catherine McKinnell]

My right hon. Friend raises an important point, and I will come to the Government’s approach to procurement in the private sector as the ripple of understanding of the benefits that the living wage can bring spreads to employers throughout the supply chain.

--- Later in debate ---

[The Exchequer Secretary to the Treasury (Mr David Gauke)]

It is a great pleasure to serve under your chairmanship, Mr Robertson, and to respond to this debate. I congratulate my hon. Friend the Member for Harlow (Robert Halfon) on securing it. He has such a reputation for being a strong representative of his constituents that it is not surprising that the hon. Member for Newcastle upon Tyne North (Catherine McKinnell) might even believe that his constituency was named after him—I know that Harlow is a new town, but a change of name might not be appropriate. However, he does a splendid job on behalf of his constituents as a whole and he does a particularly good job of representing hard-working, low-paid people up and down the country. If I may, I shall describe them as strivers, and my hon. Friend represents them very well. He sets out the case for a 10p rate clearly, with great eloquence and understanding, and I hope to respond to his points.

I thank other hon. Members who have participated in the debate, particularly those who have made speeches: my hon. Friends the Members for Aberconwy (Guto Bebb) and for Cleethorpes (Martin Vickers), and the hon. Member for Strangford (Jim Shannon). I also thank other hon. Members who have participated through their interventions.

During my remarks, I hope to set out what the Government are doing to help the very people that my hon. Friend the Member for Harlow identified as being in need of support: those hard-working, low-paid individuals who are taxed in circumstances where they do not have a lot of money. None the less, they have income tax deducted from their salary, and I will set out what we are doing to help such people.

I would like to take us back to the abolition of the 10p rate, which has obviously featured heavily during our debate this afternoon, and set out a little more information about the arguments that were made at the time and perhaps discuss some of the difficulties that those of us who were in the House had in getting to the truth of the impact of the 10p rate’s abolition—perhaps I should say the doubling of the 10p rate of tax, because that, in truth, is what happened.

In 1997, the Labour party’s manifesto stated that it was Labour’s long-term objective to have

“a lower starting rate of income tax of 10 pence in the pound.”

In the 1998 Budget, the then Chancellor, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), confirmed his intention to bring in such a starting rate

“When it is right for the economy”.—[Official Report, 17 March 1998; Vol. 308, c. 1104.]

The measure was implemented from April 1999, with taxpayers paying only 10p in the pound on their first £1,500 of taxable income. The rationale was to put work first and to ease the poverty trap, whereby people on low pay were discouraged from climbing the earnings ladder due to high marginal deduction rates. The 10p rate remained in place until the announcement in the 2007 Budget, which was the last to be delivered by the right hon. Gentleman. Those of us who were there will remember that the intention behind the abolition was pretty clear. It was a theatrical coup to conclude the last Budget by that Chancellor with a reduction in the main rate of income tax from 22% to 20%. Other measures were taken with regard to the indexation of personal allowances for those aged 65 and above and the retention of the 10% rate for savings income, but what was clear was that great, theatrical moment just before the then Leader of the Opposition stood up, not able to see all the details, and there was this surprise tax cut. Of course, questions then started to be asked about how that was to be funded in what was a fiscally neutral set of tax measures.

At the time, it became clear, once we saw the Red Book, that the Government estimated that the removal of the starting rate of income tax would yield the Exchequer an additional £7.3 billion in 2008-09, so where would the extra cash come from? It was a little difficult to get all the answers at the time. The Budget book at the time set out a list of all the people who would be winning from the changes, and the Budget statement said that four out of five households would either gain or remain in the same position as a result of the Budget measures, but we did not get much detail on the one out of five households that would lose.

The IFS confirmed that 5.3 million households would lose. A senior Treasury official, giving evidence to the Treasury Committee—I should inform hon. Members that I was a member of that Committee at the time—confirmed that that number was in the right ball park. The very next day, the Chancellor of the Exchequer came along to answer questions on the Budget. He was asked five times by my right hon. Friend the Member for Sevenoaks (Michael Fallon) about the 5.3 million households that were going to lose out, and five times he refused to confirm that number. There is a lesson to be learned from that whole episode. We should be more transparent about the impact of policy decisions, and the present Government have taken significant steps to do that.

[Mr Andrew Smith]

In the light of that commitment to transparency, will the Minister give us his estimate of how many people lost out through the vote last night?

[Mr Gauke]

The reality is that one has to look at all the measures that we are undertaking, which is what I would seek to do. It is worth pointing out that working households will gain an average of £125 in 2013-14 as a consequence of all the measures that we are undertaking. The right hon. Gentleman raises an important point—I shall return to the 10p rate in a moment—but let us remember the context in which we are having this debate now about the steps that we can take.

I will set out a case about the way in which the Government have taken substantial steps with regard to the personal allowance to help low-paid workers. We have done that at a time when we inherited an enormous deficit, and we have had to make difficult decisions about how we reduce that deficit. We have been clear in the distributional analysis of where the contributions are coming from. The facts are very clear. The top 20% of earners are making the biggest contributions, not just in cash terms but in relative terms, to reducing the deficit.

Let me return to the people who lost out from the abolition of the 10p rate of income tax. People under the age of 65 with non-savings income between £5,435 and £19,355 would have paid more, because they lost more from the abolition of the 10% rate than they gained from the cut in the basic rate. It is worth reminding ourselves that a Labour Government took that measure and that those low-paid workers would have paid more tax. The loss was greatest, at £232 a year, for someone earning £7,755—the top of where the 10% band would have been. Those most affected by the abolition of the 10p rate appear to have been those below the age of 65 with an income under £18,500 who were in childless households. The effect was greatest on those households where no individual was above the age of 60, because the household would not then benefit from the higher winter fuel allowance. That is the legacy of the last Budget of the right hon. Member for Kirkcaldy and Cowdenbeath.

Let us now consider what we have done in this difficult financial situation. We should remember that 2007 was still the age of apparent plenty; we have been in a much more difficult situation. Rather than reintroducing the 10% rate of tax, we have taken steps by increasing the personal allowance; we have taken real steps towards making the first £10,000 of income free from tax. I am grateful to a number of hon. Members for supporting that policy this afternoon. Since 2011, we have announced successive increases in the personal allowance, totalling £2,965. That includes a £1,100 increase announced in the 2012 Budget and a further £235 announced in the autumn statement last month. Following those announcements, the personal allowance rises by £1,335—the largest cash increase in history—to £9,440 from April 2013. Taken together, those changes will benefit 25 million individuals and provide a real-terms gain of £443 to most basic rate taxpayers in 2013-14. More than 2.2 million individuals with low incomes will have been taken out of income tax altogether.

I shall give some more examples of how the changes work. Let us take the context of the national minimum wage. My hon. Friend the Member for Carlisle (John Stevenson) referred to the personal allowance matching the national minimum wage for full-time employees, but let us examine what has happened to a person on the national minimum wage in full-time employment. In 2010-11, someone earning the national minimum wage would have had earnings of £10,979 and paid income tax of £901. In 2013-14, someone earning the national minimum wage will have estimated earnings of £11,691 and pay estimated income tax of £450. In other words, their bill will be halved. Another way to look at it is that, in 2010-11, such a person would have been able to work only 22 hours a week tax free; they can now work 29 hours a week before starting to pay income tax.

Another way to look at the situation is by comparing the approach that we have taken in increasing the personal allowance with the approach that the previous Government took in doubling the 10p rate of income tax. I talked about those who earn £7,755 a year and lost the most—£232 a year—as a consequence of the doubling of the 10p rate in 2008-09. In that year, an individual would have paid £344 in income tax. Under the present Government, in 2012-13, such an individual, with income adjusted for inflation to £8,299 a year, will pay about £39 in income tax—not £344 but £39 in tax, which is a saving of £305. In 2013-14, again with income adjusted for inflation, such an individual will pay no income tax at all. That is a contrast that I am very happy to highlight.

Petrol and Diesel

Andrew Smith Excerpts

Wednesday 23rd May 2012 Westminster Hall

[Robert Halfon]

My hon. Friend has read my mind; I was about to come to fuel deserts. Britain has gone from 20,000 forecourts in 1990 to 8,500 today, a drop of nearly 60%, turning huge areas of the UK into fuel deserts where motorists must drive to fill up. There are examples in Cornwall, where a hypermarket sold fuel at below cost price until all the other petrol stations went bust, after which its prices rose considerably.

[Mr Andrew Smith (Oxford East) (Lab)]

From the Labour Benches, I, too, offer support to the hon. Gentleman’s campaign. Earlier, I went to a petrol price comparison site. Would it surprise the hon. Gentleman to know that although the situation is bad in Harlow, it is even worse in Oxford? He will enjoy the support of my constituents in winning his campaign.

[Robert Halfon]

I thank the right hon. Gentleman. The next time I get my many e-mails from Harlow residents, I will pass them on to him so he can help me to respond. I am grateful for his support. It shows the Minister that this is an all-party campaign, because the issue affects everybody.

Working Tax Credits

Andrew Smith Excerpts

Wednesday 30th November 2011 Westminster Hall

[Jonathan Reynolds]

Absolutely. They stand to lose even more when child care is taken into consideration. There is an internal tension between the Government’s stated ambition on universal credit and these actions. It would be interesting to hear the Minister’s views on how those two aspects interplay.

[Mr Andrew Smith (Oxford East) (Lab)]

I join the chorus of congratulations extended to my hon. Friend. I hope that he gets time to make some points between interventions.

Does my hon. Friend agree that this represents an incredible retreat from, and abandonment of, the historic pledge by the previous Government to eradicate child poverty within a generation? Will this not have the opposite effect, in terms of the welfare to work agenda—perversely forcing some people to go back on to benefit because of all the losses they will suffer, as hon. Members have said?

[Jonathan Reynolds]

Indeed. A family currently on £18,000 a year could lose £4,000, which is a huge loss. It will, as I understand it, push as many as half a million children back below the poverty line.

The Minister may say to me that the simple solution is for claimants to work an additional eight hours. For some people in receipt of working tax credit, the demands of caring, child care or limited health may make it difficult for them to work those additional hours. These changes make no allowance for that.

I was first alerted to the scope of this issue when I was contacted by a resident in my constituency who was hit by a car 11 years ago. He was previously employed as a printer and would routinely work 12-hour shifts a day for his family. He has not been able to work since the accident and needs some degree of care. His wife, as well as caring for her husband and their young daughter, works 17 hours a week in a before and after school club. She cannot increase her hours at the school because the club runs only for those 17 hours a week. With the caring responsibilities for her husband and daughter, she would struggle to find a second job with sufficiently flexible hours. The money they receive though working tax credit makes a real difference. Under the Government’s plan they would lose it.

I acknowledge that, rightly, the Government do not plan to increase the hours of work required by single parents, in recognition of the additional pressures they face. However, they also need to consider the impact that these changes will have on families where one member is disabled, or one member has a caring responsibility, or both. They should urgently consider whether additional exemptions should be applied. Indeed, I put a range of parliamentary questions over the past six months to the Exchequer Secretary, to try to ascertain how many of the 280,000 couples that this will affect have a partner with caring responsibilities or a disability, and to get a more detailed breakdown. However, the Government could not provide much of that information, and what they could provide was extremely limited.

As I have said, the promotion of work is at the heart of the working tax credit scheme. The principle of asking people to take on work to qualify for working tax credits is a positive one. But if the amount of work we require is unrealistic, it will hurt rather than help some of the most vulnerable people in our society.

--- Later in debate ---

[Miss Smith]

I will happily tackle that. In fact, the hon. Gentleman brings me straight to the main point with which I must preface my comments, which is that we are in a very difficult position, economically speaking. That cannot have escaped the attention of anybody sitting here, least of all the right hon. Member for East Ham (Stephen Timms), who I know is very alive to all such matters. However, the fact is that when faced with a very difficult economic situation, we have to make very difficult choices. We must be mindful of the fact that to leave the country struggling under an enormous debt burden does not help anybody; normal working households would not thank us for failing to deal with that situation. So that is one view of fairness to which I shall return throughout my speech.

[Mr Andrew Smith]

I am very grateful to the Minister for giving way. If we accept for a moment the premise of her argument—tough times, difficult choices—is it not all the more important to have the closest regard to fairness, the point that my hon. Friend the Member for Sefton Central (Bill Esterson) was making? How can it be fair to target these working people in the way the Government are doing?

[Miss Smith]

I am unsure from his comments whether the right hon. Gentleman accepts the premise that we are in difficult economic times. I do not know which parallel universe he is living in, but if he is in the same one as I am, he will know that, yes, of course we must do what we do as fairly as possible. He will also know that our bank levy is raising more every year than his party raised in one year, and with that I shall, I hope, lay that topic to rest, unless the hon. Lady would like to take it further.

Arch Cru Compensation Scheme

Andrew Smith Excerpts

Wednesday 19th October 2011 Westminster Hall

[Tom Greatrex]

I thank the hon. Lady for her intervention. There are two points: a point about what the FSA did in relation to Arch Cru, and a further point about the regulatory regime. As I said, with the FCA about to be set up, there is an important issue for the Government to deal with in that regard as well.

[Mr Andrew Smith (Oxford East) (Lab)]

I congratulate my hon. Friend on obtaining the debate and on the forensic and effective way in which he is presenting a very important case, which affects my constituents as it does others. Does it not pass all understanding how the FSA could have said on 21 June in its statement that it “considers that this package”—the £54 million package—

“is a fair and reasonable outcome, which is in the best interests of investors”

when it is not fair, not reasonable and clearly not in the best interests of investors?

[Tom Greatrex]

I agree wholeheartedly with my right hon. Friend. I hope to make a couple of remarks about that package in a few moments.

European Union Fiscal Union

Andrew Smith Excerpts

Wednesday 14th September 2011 Westminster Hall

[Mr Brian Binley (Northampton South) (Con)]

I shall try to be brief and will therefore quickly congratulate my hon. Friend the Member for Stone (Mr Cash) on securing a debate of such importance. There is no doubt that the eurozone is contemplating its very existence, so the debate is not only timely but vital. The whole thing could blow up in our faces in the next four or five weeks, and I want to be assured by the Minister that contingency plans for that possibility are well established. I hope that he is not over-affected by what appears from the outside to be the culture of Treasury officials, who have not been over-helpful on this issue for a long time.

It is a truism that what has happened in the European Union in recent months will have profound consequences for the eurozone and a wider region, including Great Britain. It is unlikely that future efforts to provide protection for the failing currency will have any more success than those undertaken to date. The truth of the matter is that the euro is a failed currency and had within its creation the very traits for its destruction. Those are coming into view at a time when pressure is being applied.

The euro is in trouble not only for that reason, but because its membership does not understand what a properly conducted fiscal society means. I visited Greece three months ago and went to the Greek Parliament. I had to be smuggled in. I talked to a Greek politician and said, “Is tax evasion really widespread?” He said, “Of course.” I said, “Who are the people who do it?” He said, “Everybody.” I said, “Are you?” He said, “Yes.” I said, “What are you doing?” He said, “I’m buying gold.” What a story! Greek politicians are begging us to prop up their currency, yet they are getting out of it and buying gold. I hope that the Minister will take serious account of that.

We all know that Italy has deliberately—I shall use a kind word—misled people ever since the creation of the eurozone. Many would say that it lied—I would not say that in this place—about its situation. Many would say that other nations accepted Italy’s deceit, and therein lies another problem. There is no proper monitoring or policing of any fiscal measures in any eurozone country. How can we expect those nations suddenly to become as white as white on the application of a united fiscal unit? Of course it will not work, and we know it.

We face two possible measures. The eurozone could shed nations—those to the south, mainly—that cannot compete with the price of the euro, and never could, or the eurozone could dissolve completely, which would be very expensive for this nation. What might the Minister do to protect business if that happens?

I accept the figures given by my hon. Friend the Member for Stone, but business is worried about the impact of the eurozone dissolving. It has had a tough time for three years, and has not been overly helped by Governments of either party in this country, and it certainly does not want another great deluge of problems. Will the Minister refer to business when he responds? This country must make a decision, and it might need to do so quickly.

[Mr Andrew Smith (Oxford East) (Lab)]

I am following the debate carefully. The hon. Gentleman refers to the possibly cataclysmic effect on this country of dismemberment of the eurozone, or of some states leaving and contingency measures being required. Might that be precisely why the Prime Minister and the Chancellor have been arguing the case for fiscal union within the eurozone, and what does he think about that?

[Mr Binley]

That might be. I did not say “cataclysmic”; I said there would be problems for British business. I would be grateful if, when the right hon. Gentleman puts words into my mouth, he used the words I used.

[Mr Smith]

It is a serious problem.

[Mr Binley]

The problem is serious, and I simply want to hear what the Minister has to say about it, because we expect our Government to recognise the impact on business and to do something about it. But that does not mean being involved with or part of the creation of a fiscal Europe in the eurozone. That is not the way to go, and I would rather go the other way: free up British business and restore some of the ancient and traditional markets that we have neglected for some time.

Equitable Life

Andrew Smith Excerpts

Tuesday 20th July 2010 Westminster Hall

[Nicola Blackwood]

I agree entirely. A key concern during the general election campaign was the fear that the saving culture in this country, which for so long had been part of our economy, had been completely destroyed. We must do everything we can to avoid entrenching that destruction.

[Mr Andrew Smith (Oxford East) (Lab)]

The hon. Lady, who is my fellow Oxford Member, makes her case passionately and effectively. Is not the crucial point that we get a commitment to transparency and fairness, which is what EMAG has been calling for, and that it would therefore be helpful to hear from the Minister on how the coalition Government intend to change and enhance the remit that was given to Sir John Chadwick?

[Nicola Blackwood]

Transparency must clearly be at the heart of any process we now embark upon. As I have said, with trust at an all-time low, the only way we can ensure a process in which all partners can take part is by showing that we are not in some way trying to brush under the carpet some of the problems that the previous Government did.