Tax Fairness

Catherine McKinnell Excerpts

Tuesday 12th March 2013 Commons Chamber

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

It is a pleasure to follow my hon. Friend the Member for Luton North (Kelvin Hopkins)

This has been a good debate on what is really quite a simple premise—that our taxation system should be based on fairness and equity—but there have been some disappointing, although I would also say unsurprising, contributions from Government Members. The Minister’s speech in particular seemed to confirm that the Government have their head in the sand when it comes to their disastrous economic policies and performance. Manufacturing has fallen by 3% since last year, business confidence and investment are plummeting, growth is flatlining, and the economy desperately needs some emergency care. Borrowing is going up, not down, and it is rising to pay the price of the Government’s failure. My hon. Friend the Member for Swansea West (Geraint Davies) described the position very passionately.

The hon. Member for Bristol West (Stephen Williams) complained bitterly that the Opposition had been stealing the Liberal Democrats’ policy. He now admits that it is his policy. In fact, he could have written it himself. I therefore still hope that the Liberal Democrats will go through the Lobbies with us today to support what will be a very measured step towards ensuring that the cost of deficit reduction is borne by those with the broadest shoulders as well as by those who can bear it least but who are, at present, bearing the brunt.

[Mel Stride]

The hon. Lady referred to the hon. Member for Bristol West (Stephen Williams), who asked a simple question of her Front-Bench team: will a mansion tax be in the next Labour party manifesto, yes or no?

[Catherine McKinnell]

We gave a simple response to that question—[Interruption.] First, we challenged the Minister to say what would be in the Government’s Budget next week. He will not specify that, so we are not able to announce at this stage what will be in our manifesto in two years’ time. If it is appropriate and a mansion tax will seek to deal with the mess that we anticipate this Government are going to leave this country’s finance in, it is certainly something we will consider.

[Mel Stride]

Is the hon. Lady seriously suggesting that just because a Minister will not make a serious breach of parliamentary protocol by leaking a Budget in advance she will not inform the House whether her party will have a mansion tax in its next manifesto?

[Catherine McKinnell]

No. That illustrates why the Government were not giving away what they are going to do in next week’s Budget, but we have said clearly that if we were in government now, we would not be cutting taxes for millionaires. We would be looking to put in place a mansion tax, which the Liberal Democrats would support, and we would be using that to take a measured approach to deficit reduction. Unfortunately, we are not in government. The Chancellor is presiding over a flatlining economy, so we are suggesting a way for him to try to get some growth back into the economy —we hope that the Liberal Democrats will support us today and proposals will come forward.

[Jonathan Ashworth (Leicester South) (Lab)]

My hon. Friend should take no lessons from Conservative Members, because when they were in opposition they refused to specify—apart from supporting Labour’s spending plans—any of the policies that would be in their 2010 manifesto.

[Catherine McKinnell]

I thank my hon. Friend for his impassioned slap-down of the hon. Member for Central Devon (Mel Stride). What is clear from today’s contributions is the gap between what Labour Members—and, we hope, Liberal Democrat Members—believe to be the fair and right thing to do, and what many Conservative Members believe.

As I said, the Opposition motion is based on a simple premise: a mansion tax on properties worth more than £2 million should be part of a fair taxation system and used to fund a tax cut for millions of people on middle and low incomes. Let us be honest—I know that Government Members cannot stay in denial of this any longer—those people are finding that their household budgets are seriously squeezed. An increasing number of hard-working families up and down the country are reaching breaking point. A number of hon. Members gave heartfelt accounts of the difficulties that many of their constituents are facing: the rise in the use of food banks; the VAT increase; rising energy and fuel bills, rail fares; and other household budget difficulties.

[Stephen Williams]

rose—

[Catherine McKinnell]

I will give way to the hon. Gentleman because he has been mentioned twice.

[Stephen Williams]

The hon. Lady again mentioned the tax cut for millions of people on middle and low incomes, which is in the Labour motion and indeed the coalition Government’s alternative. Will she confirm that the tax cut in the Labour motion matches up with what the Labour leader said last month when endorsing our policy of a mansion tax and that the tax cut that Labour is talking about is reintroducing the 10p tax rate?

[Catherine McKinnell]

We have made Labour’s approach clear. We have said that we would like to fund a 10p tax rate for the lowest earners. We have not specified that that is what the Government should do with this; we have said that it should be used to fund a tax cut for those on low and middle incomes. So if the Liberal Democrats want to support us in the Lobby, they can then pressure the Government to use that money in any way they see fit.

So let me remind the House of the context of today’s debate. Many of our constituents are struggling to make ends meet, due to a combination of under-employment, stagnating wages, rising food, fuel and child care costs, and of course the Government’s hike on VAT. Our constituents will be further hit by a £6.7 billion cut in working-age benefits and tax credits over the next four years. [Interruption.] The Under-Secretary of State for Communities and Local Government, the right hon. Member for Bath (Mr Foster)—the Liberal Democrat Minister—is groaning but that is the reality for many families up and down the country. At the same time, we read of hundreds of bankers at different financial institutions, including one owned by the state, earning more than £1 million per year. We have a Chancellor seeking but failing to use his ever-diminishing influence in Europe to fight against proposals to limit bankers’ bonuses to “just a year’s salary”. We have a coalition Government who will give the 13,000 people in this country earning more than £1 million a year a tax cut of £100,000 next month. No wonder people are angry and no wonder our economy is not growing when ordinary people cannot afford to spend and invest. We—or, more accurately, the Prime Minister—heard only last week from the OBR that fiscal consolidation measures have reduced economic growth over the past couple of years.

[Stewart Hosie]

The hon. Lady is absolutely right that the tax cut for millionaires is dreadfully unfair, but can she explain why, when the Labour party had the chance, it failed to oppose the tax cut for millionaires?

[Catherine McKinnell]

These arguments have been rehearsed many times and we have made clear our absolute opposition to cutting the top rate of tax at this time while slapping charges on the poorest in society. No wonder the hon. Member for Harlow (Robert Halfon) has spoken of the Government’s need to neutralise claims that they cut taxes for the rich.

Let us look at the Opposition motion, because I think the Liberal Democrats are dancing on the head of a pin when they say that they cannot support it. It calls for the introduction of a charge on properties worth more than £2 million, a mansion tax that the Liberal Democrats have estimated would raise £2 billion. We say that it could be used to fund a 10p tax band of up to £1,000, benefiting 25 million basic rate taxpayers to the tune of £100. We believe that Liberal Democrat Members should put aside their loyalty to the Conservatives and vote in favour of a principle—the principle of tax fairness at a time when so little of it is in evidence from this Government.

How could the Liberal Democrats do otherwise? Only last month, they made the introduction of a mansion tax the centrepiece of their Eastleigh by-election campaign. Recent media appearances have certainly suggested that they will support the principle, with the Business Secretary declaring that if the Opposition motion

“is purely a statement of support for the principle of a mansion tax I’m sure my colleagues would want to support it.”

Asked again at the weekend which part of the Opposition motion he disagreed with, the Liberal Democrat president, the hon. Member for Westmorland and Lonsdale (Tim Farron), replied, “None of it.” The former leader, the right hon. Lord Ashdown, declared that it would be “weird” if the Liberal Democrats voted against it. He is not the first person to call Liberal Democrats weird, but they have the opportunity to put that right today and to get on the road to normality by supporting their own policy.

Only yesterday, the hon. Member for Bristol West—I shall mention him one last time—said of the Opposition motion,

“I could have written it myself”,

yet today he complains that we have stolen his party’s policy. If such childishness gets in the way of the Liberal Democrats supporting their own policy in the Lobby, members of the public will be baffled and extremely disappointed.

[Stephen Williams]

rose—

[Catherine McKinnell]

I would give way, but I am running out of time.

We think that the Opposition motion presents those of us who believe in a fair and equitable taxation system with the opportunity to demonstrate that fact by voting in favour of it today. Will this be yet another example of the Liberal Democrats saying one thing to the electorate and doing something very different in government? What about their partners in crime—I am sorry, Mr Deputy Speaker, I mean partners in government—the Conservatives? We know that an increasing number of Conservative Members fear that they appear out of touch and that some, most notably the hon. Members for Harlow, for Camborne and Redruth (George Eustice), for Aberconwy (Guto Bebb) and for Cleethorpes (Martin Vickers), all of whom are noticeably absent from the Chamber, have argued that a way to counter that impression would be to reintroduce a 10p tax rate.

I have argued before that the best way to neutralise the impression that the Government are out of touch and only cut taxes for the rich is to stop cutting taxes for the rich, such as the millionaires’ tax cut that will take effect from April. I also acknowledge that it was a mistake to get rid of the 10p rate in 2007, although it enabled the 22p rate to be reduced to the 20p rate that is still in place today.

We believe that the best way to fund a new 10p tax band is through the mansion tax. Many right hon. and hon. Members have expressed concerns about how the mansion tax would work in practice, about how properties would be valued and about how people who live in £2 million properties but are apparently cash poor would pay. We have also heard, however, that the Treasury is drawing up detailed proposals for an annual charge on high-value residential properties owned by companies, partnerships or investment vehicles. It demonstrates that our plans—Liberal Democrat and Labour plans—for a mansion tax, an annual charge on high-value residential properties owned by private individuals, are entirely feasible, entirely realistic and entirely possible.

Our motion calls on the Government to bring forward proposals for a mansion tax, so that they can be considered in more detail by the House. The Opposition motion is simply expressed; it responds to Liberal Democrat concerns, and we still hope they will support us by voting for it. It calls for a tax on individuals fortunate enough to live in a high-value residential property, to support a tax cut for millions of hard-working low and middle-income families up and down the country at a time when they desperately need our support to put money back into household pockets and demand back into the economy. The motion provides all Members with the opportunity to demonstrate their support for a tax system based on fairness and equity, and I commend it to the House.

--- Later in debate ---

[Catherine McKinnell]

May I put a suggestion to the Minister? If Liberal Democrat Members support the motion and the Government bring forward proposals, they would not need to include the scheme in their next manifesto.

[Mr Foster]

I may return to the hon. Lady’s comments in a second.

We are supportive of the motion because we agree with Adam Smith, the father of free market economics. He supported higher taxes on property to reduce taxes on more industrious endeavours. We think it unfair that the richest people in the country pay the same council tax on their multi-million pound palaces as a family in a three-bedroom house in the suburbs. We agree on that.

Both parties in the coalition have been open about our disagreement, but the Opposition’s attempt to drive a wedge between us is infantile. Both parties know where we stand, and the public are clear about it too. The hon. Lady has to remember that all coalition tax policy is made by agreement between the Conservatives and the Liberal Democrats, and the mansion tax is an issue on which we simply could not agree. However much Liberal Democrats want a mansion tax, we know that the country’s economic future would be in severe jeopardy if the coalition fell apart on this issue. The country’s future is far too important for us to engage in the Opposition’s petty political games.