Finance Bill (First sitting)

Chris Philp Excerpts

Thursday 17th September 2015 Public Bill Committees

[Barbara Keeley]

I think comments that somebody made when they were a Back-Bench MP are different. Once somebody has taken on a role, either in opposition or in government, what they say carries a certain weight. There is a freedom to the Back Benches that I and others here have experienced. Many Members of the Conservative party say things that their Front-Bench team would not agree with. That is my distinction, and I am sticking to it.

It appears that the Chancellor had a change of heart, and now feels the need to pass a law to convince people that he has the political will to implement his own Budget. During the debate on the National Insurance Contributions (Rate Ceilings) Bill earlier this week we discussed the view that measures such as this are in fact gimmicks. We questioned why Ministers feel the need for this additional legislation when the promises that the Prime Minister and the Conservative party made during the election should be good enough. To people outside Westminster, it could appear that Treasury Ministers have lost confidence in their ability to stick to their resolutions, or perhaps they fear that everyone else has lost confidence in their ability to keep their word. The Minister may want to tell us which he thinks it is.

Although Labour supports the pledge to make no increase to VAT, income tax and national insurance contributions during this Parliament, I still question whether introducing legislation to ensure those locks is the best course of action. Rather than gimmicks, we need long-term tax reform and sensible policies to ensure that the taxpayer gets a good deal.

We have some concerns about the durability of the income tax lock in clause 1. As it stands, it appears that rates could be raised by repealing the Bill in a future Budget. Can the Minister assure the Committee that it is not simply a gimmick? Will he outline how he intends to show that the lock will remain in place? In our deliberations, we should consider the impact of that tax change and the other changes to the tax system announced in the Budget. As many tax experts have pointed out, only then will we be able to see the real impact of Government measures on particular groups of people.

In Committee of the whole House, I raised the issue of the insurance premium tax. Although the clause protects workers against an income tax rate rise, I note that they will not be protected from the other tax increases in the Bill.

[Chris Philp (Croydon South) (Con)]

I look forward to serving under your chairmanship, Sir Roger; I hope to profit from your experience. I want to challenge the hon. Lady’s assertion that the tax lock is a gimmick. Is it not in the same spirit as the legislation that ensures that 0.7% of GDP is spent on international aid each year? That measure is ensuring, as we speak, that refugees from Syria are being rescued from terrible circumstances. Is this not in a similar spirit?

[Barbara Keeley]

I do not think it is. In fact, if it is seen in the same way, someone needs to have a word with the Prime Minister. He constantly refers to the 0.7% commitment as a matter of huge pride and has quoted it a great deal in our debates about the refugee crisis over the past week or two. The difference with financial matters—this is probably why the current Chancellor was so critical of things in 2009—is that there are many opportunities to legislate. This is the third Finance Bill this year, so things could change. The 0.7% international aid commitment was a very long-term commitment. It came up a great deal in international discussions and still does, so there is a difference.

I was talking about the insurance premium tax and the fact that people are not protected from those sorts of tax increase. Paul Johnson, director of the Institute for Fiscal Studies, has said:

“The tax and welfare changes between them mean that poorer households have lost quite significantly and as a result of yesterday’s Budget, much more significantly than anything that has happened to richer households.”

He also said:

“Unequivocally, tax credit recipients in work will be made worse off by the measures in the Budget on average.”

Let us bear in mind that many of the households that benefit from this tax lock have been adversely impacted by other tax changes. In fact, the summer Budget did not cut the overall tax bill; it raised it.

--- Later in debate ---

[Barbara Keeley]

Absolutely so. A great deal is said at the moment about working people, working families and who supports them. Paul Johnson, director of the IFS, has said:

“Significant allowances were an integral part of the design of universal credit, intended to give claimants an incentive to move into work.”

That is an important point. On tax credit cuts, he adds:

“This reform will cost about 3 million families an average of £1,000 a year each. It will reduce the incentive for the first earner in the family to enter work.”

[Chris Philp]

Could the hon. Lady confirm whether it is the Labour party’s intention to reverse the tax credit proposals put forward earlier this week?

[Barbara Keeley]

We had the same question the other day. It is not helpful for us to keep repeating things.

As we saw during the election campaign, we have a different mix of changes that we want to introduce and different ways of moving the economy forward, and that will always be the case. I am sure we would not have made the cuts to tax credits. We introduced tax credits to help working people. We believe in them, because they help to bring children out of poverty. We would never have made such savage cuts. We believe that it is necessary to tackle the root causes of welfare spending—low pay and high housing costs—to bring down Government spending sustainably. Those things are not being tackled; rather, the infrastructure that supports families in work is being taken away. The Institute for Fiscal Studies confirmed that the introduction of tax credits played an extremely powerful part in the improvement in child poverty figures, and that is what is at risk.