Finance (No.2) Bill
Debate between David Gauke and Huw Irranca-Davies(10 years ago)
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Mr Gauke
That is not correct, because of the way we have done this. I will not spend a lot of time on the matter, but I can tell the hon. Gentleman that in preparation for this speech I have seen various responses from those raising concerns about higher-rate taxpayers not benefiting from the increases in the personal allowance in the way that basic-rate taxpayers have. Indeed, those earning more than £100,000 a year do not benefit from increases in the personal allowance because it starts to be taken away.
The reality is that basic-rate taxpayers have benefited most from the measures that we have taken in increasing the personal allowance. More than 26 million taxpayers will be up to £570 better off in real terms in 2015-16 as a result of this Government’s changes. In 2014-15, basic-rate taxpayers already pay up to £700 less income tax than they would have done four years ago. By 2015-16, the Government will have cut their income tax bills by over £800 per year. Together, all the personal allowance increases since 2010 mean that this Government have cut the number of income tax payers more in five years than any Government in a similar period since records began.
Huw Irranca-Davies
Will the Minister correct what may be a misunderstanding? Is it correct that 13,000 people who earned more than £1 million a year would have benefited to the tune of £100,000, on average, from the reduction in the top rate of tax?
Mr Gauke
Amendment 4 and new clause 4, tabled by Opposition parties, deal with familiar matters that we debate every year. They propose, once again, that within three months of passing the Finance Act, the Chancellor should publish a report reviewing the impact of setting the additional rate at 50%. In addition, amendment 4 asks for an assessment of the impact of setting the additional rate for 2014-15 at 45% and at 50% on the amount of income tax currently paid by those with taxable incomes of over £150,000 and over £1 million per year. Needless to say, such an analysis, in order to be credible, would need to take behavioural impacts into account, as did the HMRC report on the additional rate published at Budget 2012. When increasing taxes, it is not enough merely to look at theoretical income tax liabilities. Let me assure hon. Members, once more, that this Government already consider the impact of any policy decisions taken. The HMRC report on the additional rate concluded that the underlying yield from the introduction of the 50p rate was much lower than originally forecast due to large behavioural effects. It even said that it is possible that the 50p rate could have reduced income tax revenue instead of increasing it. It would be illogical and unfair to reintroduce a tax rate that is ineffective at raising revenue from high earners and that would end up making ordinary taxpayers pay more and risk damaging growth.
Huw Irranca-Davies
I genuinely thank the Minister for trying to explain that to me, but he has just described the top-end tax cut as a theoretical tax cut when my understanding is that it is a very real tax cut whereby 13,000 people who are millionaires or richer have each saved more than £100,000 per year. At this very moment, my constituency is digging deep as a result of cuts to school transport. Will the Minister confirm that the tax cut is not theoretical, but real, and that 13,000 people who are millionaires or richer have each saved to the tune of £100,000 as a result of it, when the median wage in my constituency is sub-£21,000?
Mr Gauke
Let me see if I can find a point of consensus with the hon. Gentleman. We want—and I suspect he wants—to ensure that the wealthiest make a fair contribution towards reducing the deficit, and the challenge for any Government is to work out the best way of doing that. Let us look at this Government’s record on raising money from the wealthiest. Budget 2010 increased the higher rate of capital gains tax and Budget 2011 tackled avoidance through disguised remuneration—a policy that was opposed by the Labour party, even though it addressed avoidance by high earners. Budget 2012 raised stamp duty on high-value homes and autumn statement 2012 took action to reduce the cost of pensions tax relief, while Budget 2013 and autumn statement 2013 announced further measures to tackle offshore evasion by high earners. In 2013-14, the richest 1% of taxpayers contributed a larger share of income tax receipts than in any other year, including every year under the Labour Government.
The point is how we raise money from the wealthiest. The 50p rate is not the most effective way of doing that, because the behavioural effects are so strong that it fails to raise money. Now that growth is finally picking up, the Government will not consider any actions that might put the UK’s recovery at risk. Despite reducing the additional rate, the richest now pay more income tax than they did in any year under Labour.
Huw Irranca-Davies
The hon. Gentleman gives us examples of people arguing that the policy is economically illiterate, but we are politicians, not economists. I will try to reach consensus with him by saying, although perhaps I should not, that the policy is in his party’s interests. The biggest segment of those who donate to the Conservative party—providing more than half its donations—are from financial services. To say to them, “We are all in it together. You will have to accept a little bit more pain”, would be a good political signal, let alone an economic one.
Mr Gauke
I am always grateful to the hon. Gentleman for his political advice. I cannot but notice that he talked about wanting to uphold the values of the British people and then quoted Karl Marx—but there we go. My point is that the wealthiest are making a bigger contribution in income tax, capital gains tax and stamp duty, and that this Government are taking further action to deal with avoidance and evasion more effectively than any previous Government have done.
Oral Answers to Questions
Debate between David Gauke and Huw Irranca-Davies(10 years, 4 months ago)
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Huw Irranca-Davies (Ogmore) (Lab)
7. What recent representations he has received on reform of the Office for Budget Responsibility.
The Exchequer Secretary to the Treasury (Mr David Gauke)
The Chancellor receives representations on a wide range of matters, including on the role of the independent Office for Budget Responsibility.
Huw Irranca-Davies
Labour has called for the OBR charter to be amended so that it can independently audit the manifestos of political parties in the run up to elections. Will the Minister now support that proposal?
Mr Gauke
We are cautious about that because, as a Labour spokesman in the House of Lords said in 2010:
“the OBR should not become embroiled in political controversy.”
I understand that the Labour party is seeking ways to improve its economic credibility. I suggest that a better, more obvious approach would be to change the shadow Chancellor.
Living Standards
Debate between David Gauke and Huw Irranca-Davies(12 years, 2 months ago)
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Mr Gauke
Let me make a little more progress.
We want to target support where it is needed most. Tackling the deficit fairly requires us to ensure that tax credits are targeted at our poorest and most vulnerable families. We simply could not continue on the path that the previous Government took. From 2003-04 to 2010-11, spending on tax credits increased from £18 billion to an estimated £30 billion, with nine out of 10 families with children eligible for tax credits. In total, the previous Government had spent more than £150 billion on tax credits since 2003—a staggering sum, poorly targeted and an unsustainable level of spending. It is absolutely right and fair to reform the system to support those who need it most.
Huw Irranca-Davies (Ogmore) (Lab)
At Work and Pensions questions earlier, the Secretary of State made it clear that because of the support of Jobcentre Plus and other agencies, he did not expect anybody to opt out of work as a result of the changes. Does the Minister stand by that? If so, let me give him this challenge. If any family comes into my constituency office to tell me that it is no longer worth them going to work because of these changes, will he personally respond to their financial queries, which I will put in front of him? I suspect that other Members will be doing exactly the same to explain to their constituents why this Government have now made it no longer worth going to work. This seems to be a complete aberration and against his own policy—
Madam Deputy Speaker (Dawn Primarolo)
Order. Interventions need to be brief.