Taxation (Living Wage)

Catherine McKinnell Excerpts

Tuesday 22nd January 2013 Westminster Hall

[Catherine McKinnell (Newcastle upon Tyne North) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Robertson.

I commend the hon. Member for Harlow (Robert Halfon) on securing this debate on what is undoubtedly a crucial issue, not just for families on low incomes, but for our society and economy as a whole. We both share a great passion for promoting the importance of apprenticeships, and I believe we were among the first Members to employ an apprentice in our offices. Given today’s debate, it also seems that we share a passion for ensuring a fair distribution of wealth, for eliminating poverty and for creating incentives to work. That is why I am delighted that he secured the opportunity to debate this important subject, and particularly the benefits of a living wage, although I fear that our views diverge on the solutions that we would pursue to achieve those aims.

I commend hon. Members who contributed to the debate. The hon. Member for Strangford (Jim Shannon) made a powerful speech about the plight of low-paid workers and the striving private sector in his constituency. The hon. Member for Aberconwy (Guto Bebb) also made a comprehensive and powerful speech, although I dispute some of the issues that he raised, and particularly something that many hon. Members have talked about today—the idea of taking money away and giving it back.

No one, however, mentioned the impact of some of the Government’s changes. The strivers’ tax that was voted through by Government Members last night will have a devastating impact on many women across the country. Huge support is given to help women to cope with their child caring responsibilities and to support them to stay in work by making work pay, despite the significant costs of child care and taking maternity leave. That seemed to have been completely overlooked in the debate, so I wanted to draw attention to it.

[Mr Rob Wilson (Reading East) (Con)]

Will the hon. Lady let us know whether the Labour party is in favour of a 10p tax band or against it?

[Catherine McKinnell]

At the moment, the key issue is the impact of the Government changes, particularly on low-paid workers. The Government present the rise in the personal allowance as a benefit for some of the lowest-paid workers, but the reality is that several of the measures announced in the Budget and the recent autumn statement are impacting on those very workers whom Government Members profess to want to support. After one does the maths, there is huge concern regarding making work pay for those people.

The hon. Member for Cleethorpes (Martin Vickers) talked about the withdrawal of tax credits and keeping more money in people’s pockets, but Government Members have overlooked the major issue of the increase in VAT, which has had a massive effect on many people’s pockets. There is talk about how people should be required to make a contribution, yet low-paid workers throughout the country are making a contribution every day because of the additional VAT that is levied on them.

[Mr Rob Wilson]

Will the hon. Lady give way?

[Catherine McKinnell]

I want to make a bit more progress on setting out our position.

I challenge the hon. Member for Harlow on his approach, given that he, along with Government Members, yesterday voted through a measure that is effectively a real-terms cut for millions of striving families throughout the country. He voted for £6.7 million in working-age benefits and tax credits to be taken away over the next four years, thus cutting such support in real terms. I will be interested to hear the Government’s response to his contention that the reintroduction of the 10p tax rate would be the solution to the devastating impact on many families of such changes.

We are all too aware that the economic situation in which we and the Government find ourselves is challenging, to say the least. As a result of the Government’s failure to generate jobs and growth, they are set to borrow £212 billion more than planned, and the Chancellor has had to admit that he is set to miss his target of getting the national debt falling by 2015. The Office for Budget Responsibility has revised social security spending up by £13.6 billion by 2015-16, which is the price tag of higher unemployment. Although it is welcome that the unemployment figures have fallen recently, if we look behind the headline numbers, we see that long-term unemployment is not coming down, and that unemployment rose in a third of England over the past month.

People are struggling to make ends meet due to a combination of under-employment, stagnating wages, rising food, fuel and child care costs, and the hike in VAT. The situation is leading many people to a point at which they are increasingly using food banks and are often forced to work two or even three jobs just to keep their heads above water. Only yesterday, an alliance of 100 energy companies, charities and businesses joined forces to warn the Prime Minister that Britain is heading towards a fuel poverty crisis as a result of the Government’s failure to tackle that problem properly, with perhaps up to 9 million homes affected by 2016.

We heard several interesting contributions about the living wage, especially from the hon. Member for Harlow. To some extent, they built on the debate earlier this month that was secured by my hon. Friend the Member for Erith and Thamesmead (Teresa Pearce) which, like the hon. Member for Strangford, I read with great interest. The living wage campaign has been around for just more than a decade, but events of recent years have meant that the policy has come of age and is now right at the top of the political agenda. There is no doubt that Labour’s national minimum wage transformed the lives of millions. The policy not only affected people’s personal finances, but meant that the Government had made a clear statement that there was a line under which pay for an hour’s work would be unacceptable.

[Mr Rob Wilson]

The hon. Lady is being generous in giving way and I hope that she will not mind me restating my question, but I have not yet heard the answer. I am not asking for a policy, only whether, in principle, she and the Labour party are in favour of a 10p tax band or against.

[Catherine McKinnell]

The hon. Gentleman is well aware that Labour introduced the 10p tax rate. In the context of levelling out income tax and the personal allowance, the tax rate went from 22% to 20% and the 10p rate was abolished. There were various debates about winners and losers at the time, and there is no particular move at the moment to reintroduce the 10p rate. We are more concerned about the impact of the Government’s economic measures on low-paid workers, which the hon. Member for Harlow was discussing.

The Labour party’s approach has been clear—to tackle issues of low pay and to ensure that work always pays. We therefore want support for those who need extra help to make work pay, to keep them off benefits and to ensure that they can afford necessities such as child care so that they can stay in work. We have made our policy clear and we are therefore proud of what we achieved through the tax credit system.

[George Eustice]

I am grateful to the hon. Lady for giving way on this obviously difficult point. Having been in opposition, I fully understand her difficulties with people trying to bounce her into writing a manifesto commitment for the next election, but can she say whether the Labour Government made the right decision to abolish the 10p rate or, with hindsight, was that a mistake?

[Catherine McKinnell]

I appreciate the hon. Gentleman’s concern, but I am trying to discuss the premise proposed for debate today by the hon. Member for Harlow, which is people on low pay and the living wage campaign, so I will return to my point on the national minimum wage, which transformed the lives of millions. The policy is now taken for granted, but it was implemented in the face of often strident opposition, in particular by members of the Conservative party. Despite significant opposition at the time, however, it now seems to be universally accepted as an important aspect of our economy in ensuring fairness across the board.

The squeeze on people’s incomes and the ever-increasing cost of living, of which we are all aware and which we have all seen among our constituents, mean that for many the national minimum wage is simply not enough to make ends meet. Thus, a higher rate of £7.45 per hour outside London and £8.55 per hour inside the capital has been calculated by the Centre for Research in Social Policy as the level required to enable people to provide for themselves and their families.

[Guto Bebb]

On the minimum wage, although I was not in this place for the debates, my recollection is that the issue was about the scale and level of the minimum wage. My real concern was that the state was imposing a minimum wage on small businesses but also helping itself to tax from that minimum wage. Surely it is a good thing that the coalition is ensuring that people on the minimum wage are now paying significantly less tax.

[Catherine McKinnell]

Could the hon. Gentleman repeat his premise about how the Government are helping people on the minimum wage to pay less tax?

[Guto Bebb]

The point is simple. The Labour Government brought in a minimum wage, and yet the Government of the day helped themselves to significant amounts of tax from that minimum wage. In other words, small businesses in constituencies such as mine felt that they were being forced to pay higher levels of wages in order for the Government to be able to help themselves to tax. Surely this Government, by increasing the personal allowance so significantly, have reduced the tax take from those on the minimum wage.

[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.

[Robert Halfon]

The hon. Lady mentioned some companies that have supported the living wage. That is all well and good, but they are big corporate companies that can afford to pay it. The issue for me is that smaller companies will find it much harder to afford to implement it. Surely the best way to help the lower paid is what the coalition is doing—cutting tax for low earners and taking 2 million lower income people out of tax all together. Is that not a much more effective way of helping the lower paid?

[Catherine McKinnell]

As I have said, the impact of the Government’s changes and the raising of the personal tax allowance have provided some help for those on the lowest wages, but the real impact has been detrimental. The figures from the Institute for Fiscal Studies show clearly that a family with one working earner will be worse off, on average, by £534 by 2016 because of all the tax and benefit changes that have been pushed through. I take on board the hon. Gentleman’s point, but the Government’s policies are hitting lower paid workers, not helping them.

[Robert Halfon]

I thank the hon. Lady for being so generous. She is right if she takes the benefits changes by themselves, but if she then looks at the lower tax for lower earners, the council tax freeze and other measures the Government have introduced, lower income workers will not be worse off in the way she describes.

--- Later in debate ---

[Catherine McKinnell]

That is certainly not the case in the studies that I have read on the overall impact of the tax changes that the Government have pushed through. The hon. Gentleman raised the important point about the best approach. I am sure that he is aware that the analysis by the Institute for Public Policy Research and the Resolution Foundation suggested that introducing a living wage could lead to a net gain to the Treasury of more than £2 billion a year when the costs of paying it throughout the public sector are set against reduced benefit and tax credit payments, and higher income tax and national insurance receipts.

As the living wage campaign takes hold, wins the arguments and wins over more and more companies, including those throughout the supply chain and smaller companies, it will improve the economy as a whole, and help to put more money in people’s pockets to spend in the local economy. That is vital when so many high streets and local companies are struggling. We have seen many worrying examples of high street shops closing. That compares with the suggestion of the hon. Member for Harlow to reintroduce the 10p tax band, which the Library estimates would cost around £6 billion a year. The cost of the hon. Gentleman’s approach is indeed high, particularly when set against the gains made to the Treasury from its ill-thought-through cut in support for low-paid families that was voted through last night.

The hon. Gentleman has set out his suggested approach for supporting low-paid workers. The Government’s approach needs a little more inspection at this stage. Last night, the striver’s tax was voted through, and according to the IFS, 7 million working households will lose an average of £165 per year. Indeed, its calculations show that the impact of the changes announced in the autumn statement between now and April 2015 will be to reduce the real-terms income of a one-earner working family by £534 on average by 2015-16. We know that a further 200.000 children will be pushed into poverty as a result of the uprating measures that were voted through last night.

Despite what the Chancellor may like to believe and some of the rhetoric from hon. Members on the Government Benches, it will not be so-called shirkers who suffer the impact of the changes. The Children’s Society has calculated that up to 40,000 soldiers, 300,000 nurses and 150,000 primary and nursery school teachers will lose out as a result of the 1% uprating decision. I have mentioned the impact of the mummy tax on women. The Government are not content that two thirds of those affected by the 1% uprating of benefits and tax credits will be women; they want to impose an effective tax cut of £180 on working women through their real-terms cut in statutory maternity pay.

Those are just a few examples of the Government’s warped priorities for workers on lower incomes, and there are many more. People are angry that they are being asked to pay the price of the Government’s economic failure when they are already struggling to get by, and when—all credit to the hon. Gentleman for raising this—the Government have decided to give a tax cut to millionaires. They need to neutralise the perception that they are giving tax cuts to the rich.

[Paul Uppal (Wolverhampton South West) (Con)]

That point is well worn and made continually, and I am sure that all Members are aware of the top rate of tax being cut, but there is an element of financial amnesia here. As even people who only have a rudimentary understanding of economics will appreciate, the main way that wealthy people accumulate wealth is through wealth creation, rather than income, which is always variable. If we look at capital gains tax, the current rate is 28%, which is in stark contrast to the previous Labour Government, where venture capitalists were paying capital gains tax at a rate of 10%—often much lower than the cleaners who were cleaning their offices.

[Catherine McKinnell]

I appreciate the hon. Gentleman’s point. We always have to support business growth and creation. Unfortunately, many of the Government’s policies are impacting on individuals and on consumers who will buy the goods that such companies make. In reality, that is resulting in stagnation and no growth in the economy, which is taking the country backwards, not forwards, but I take his point on board.

I suggest that a simple and effective way of pulling off an image neutralisation attempt would be by not going ahead with that tax cut for the rich, and by not pushing through real-term cuts for people in work, but on low pay. The hon. Member for Harlow has put forward his alternative argument—the restoration of the 10p rate of income tax on income between £9,205 and £12,000. However, as he notes in his early-day motions, restoring the 10p rate of income tax would move workers on the minimum wage only

“about halfway towards earning the Living Wage”,

and that would be at a cost to the Exchequer of around £6 billion a year, according to the Library. I can see alarm bells potentially ringing in the Minister’s head at that prospect, particularly when the Government are forecast to borrow £212 billion more than they planned to borrow two years ago and are failing one of the key economic tests that they set themselves.

In conclusion, the Government have repeatedly stated that they support the living wage and encourage businesses to take it up where possible. That is laudable, and the Opposition agree that the living wage should not be mandatory, but we encourage as many companies as possible to implement it. I would be grateful if the Minister could provide us today with examples of measures that the Government have taken to encourage the uptake of the living wage, as well as specific examples of what firms are now doing as a consequence of the Government’s actions.

I know from my work on apprenticeships that the use of the public procurement system in encouraging take-up has been a particular area of interest for the hon. Member for Harlow. My right hon. Friend the Leader of the Opposition has suggested that we can learn from local government procurement to see whether central Government can use their buying power to insist that large firms winning major public contracts commit to being a living wage employer. I suspect that the Minister may cite EU procurement rules as preventing that from becoming a reality, but the European Commission has stated:

“Living-wage conditions may be included in the contract performance clauses of a public procurement contract ‘provided they are not directly or indirectly discriminatory and are indicated in the contract notice or in the contract documents’.”

Will the Minister clarify whether the Government have any intentions of taking that idea forward?

Finally, I would be grateful if the Minister outlined which Departments are now living wage employers and which are not. It is absolutely vital that the Government show leadership on that issue. Will he clarify whether the Treasury pays the living wage to all its staff?

Once again, I applaud the hon. Member for Harlow for securing the debate, and for highlighting the plight of low-paid workers and the squeeze on families in these straitened times. I am interested to hear the Minister’s response to the suggested approach; how that can be reconciled with the squeeze on low-paid workers that his Government forced through Parliament last night; and what his Government will do to encourage more businesses to pay their workers the living wage.

--- Later in debate ---

[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.

[Catherine McKinnell]

The Minister is setting out an interesting argument. Is he therefore making the case or suggesting that the Government will support the hon. Member for Harlow in his call for the reintroduction of the 10p tax rate?

[Mr Gauke]

The argument that I am making is about the contrast that can be drawn with the approach taken by the present Government, who have focused on reducing the tax bill for low-paid workers. That could be done in different ways, but we have undoubtedly, as a Government, reduced the income tax bill for low-paid workers. That compares favourably with the approach taken in the last Budget of the right hon. Member for Kirkcaldy and Cowdenbeath, in which he introduced a measure that increased pretty substantially the amount of income tax that low-paid workers had to pay. It is worth highlighting the point that we as a Government have done more, in very difficult circumstances, for those low-paid workers than the previous Government did.

I think that my hon. Friend the Member for Harlow agrees that we should meet the £10,000 target. The debate is then about where we go next. I will not be drawn into going beyond the firm commitment that we have in the coalition agreement and that has been evidenced by the steps that we have taken at every Budget and in the last autumn statement to make progress towards meeting that £10,000 target for the personal allowance.

My hon. Friend has set out very clearly the case for focusing on reintroducing a new lower rate. There are pros and cons of such an approach, and the debate on that will continue. As he would expect, I will not make any commitments on the matter. Clearly, there is a substantial fiscal cost in reintroducing a 10p rate of income tax. However, the Government’s values are clear. The overall cost of the personal allowance by the end of this Parliament will be around £9.5 billion a year as a consequence of the measures that we have taken. Clearly, where we can, we have been prepared to take substantial steps, at quite significant cost, to reduce the income tax bill for those on low earnings. That is something of which we should be proud, and as a number of my hon. Friends have said, we should be communicating that out there, because it demonstrates our values.

--- Later in debate ---

[Mr Gauke]

I should perhaps check the numbers, but I believe that my hon. Friend is in the right area. Those are, I think, the realistic costs. I am not here to make any further commitments beyond what we have said in the coalition agreement, but it is right that we have this debate. It is also right that we acknowledge that we are all trying to do the same thing, which is to reduce the tax burden on those hard-working, low-paid workers who have to pay more tax, partly as a consequence of a specific decision taken by the previous Chancellor in 2007 to double the 10p rate.

[Catherine McKinnell]

We are nearly at the end of the debate, and I am conscious that the Minister has not really addressed any of the issues that relate to the living wage and what the Government might do to promote that policy as well.

[Mr Gauke]

The Government are supportive of the living wage, which the hon. Lady has described as commendable or laudatory. However, unlike the Opposition, the Government do not believe that it should be mandatory. She appears to be in search of a dividing line on that issue. [Interruption.] I am pleased to see her shaking her head. There is cross-party consensus that the living wage has a useful role to play. We support it; we welcome it when organisations adopt it; but we do not believe that it should be mandatory. There are risks involved. In some circumstances, it might increase the cost to the taxpayer in higher salaries, and in others, it might result in higher unemployment. That is why we do not think it should be mandatory and why, I assume, she feels the same way, unless she has a different rationale.

[Catherine McKinnell]

I was seeking clarity on the questions that I raised and whether the Government are taking positive steps to promote the living wage.

[Mr Gauke]

It is very much for organisations and institutions to determine their own remuneration policy. We support such a wage in principle, but we will not make it mandatory, and there is cross-party consensus on that.

I turn now to the other steps that we are taking to support the low-paid workers whom my hon. Friend highlighted so well in his remarks. We have helped local authorities to freeze council tax for three years in a row, and we are proposing to set the council tax referendums thresholds at 2% for 2013-14.

I cannot, of course, go through a debate with my hon. Friend without referring to fuel duty. He is a keen campaigner on that point and he will be well aware of the steps that we have taken to ensure that average pump prices are currently 10 pence per litre lower than if we had implemented the fuel duty escalator. They will remain at least 10 pence per litre lower over the remainder of the Parliament than they would have been had we stuck to the plans that we inherited. In practical terms, it will cost £5 less for a typical motorist to fill their tank today and £8 less by the end of the Parliament.

We are taking numerous other steps to ease the load on those on low and middle incomes. We have capped average regulated rail and Transport for London fare increases at RPI plus 1% for the third year in a row. We have increased the basic state pension by £5.30 last year, which is the biggest cash increase ever, and we have introduced a triple guarantee, to ensure that it will increase each year using the increase in earnings, prices or 2.5%, whichever is highest.

I am conscious of the time, so let me say that I congratulate my hon. Friend on securing the debate and all the other attendees on their excellent contributions. As I have said, I think that my hon. Friend and I agree that the Government should reduce the tax burden on people on the lowest incomes. Our focus has been on increasing the personal allowance. I am confident that our policies, both on the minimum wage and the personal allowance, are exactly the right ones to achieve that.