David Ward
Main Page: David Ward (Liberal Democrat - Bradford East)Department Debates - View all David Ward's debates with the HM Treasury
(12 years, 2 months ago)
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Rachel Reeves
As the Chancellor once said, we are all in it together, and if we have a deficit to reduce it is right that those with the broadest shoulders bear a little more of the burden. That was why the former Chancellor increased the top rate of tax to 50p. This Government have reduced it and are instead asking millions of ordinary families and pensioners to pay more so that millionaires can pay less. That is their priority; the Opposition’s priorities are very different.
Mr David Ward (Bradford East) (LD)
Is it not true, though, that the Labour Government were running a deficit before the recession? Why could the tax rate not have been raised then, to contribute to reducing it?
Rachel Reeves
The hon. Gentleman was not in the House earlier when it was mentioned that between 1997 and 2007, the debt-to-GDP ratio fell from 42.5% to 36%. The debt burden fell in the first 10 years of the Labour Government. I was not in the House in the last Parliament, but I wonder whether any Members can remember the Liberal Democrats asking for lower Government spending then. I do not remember it, but perhaps the hon. Gentleman could enlighten me about when he opposed Labour’s spending on schools and hospitals in Bradford and elsewhere.
Mr Chope
My hon. Friend gives me the opportunity to hide behind the manifesto commitments made by the Conservative party and the Prime Minister. I was going to refer later to some of the background, but, prompted by that intervention, I will perhaps say the following. When the Prime Minister was Leader of the Opposition, he said:
“I want the next Government to be the most family friendly Government we’ve ever had in this country”.
On 5 March 2010, he told a public meeting in Bolton that he would not change child benefit. On 6 October 2009, six months or so earlier, the then shadow Chancellor, now the Chancellor of the Exchequer, told the Conservative party conference:
“We will preserve child benefit”.
I certainly went into the general election thinking that we would preserve child benefit as part of the universal benefit system in the same way as we would preserve the universal benefits that are applicable to so many of my constituents, as my hon. Friend points out.
My belief was reinforced on 22 June 2010, when the Chancellor said in his Budget speech in this House that
“we have decided to freeze child benefit for the next three years. This is a tough decision, but I believe that it strikes the right balance between keeping intact this popular universal benefit, while ensuring that everyone across the income scale makes a contribution to helping our country reduce its debts.”—[Official Report, 22 June 2010; Vol. 512, c. 173.]
At that stage, everybody thought that that was the end of it. We would retain child benefit, but freeze it for three years, The yield to the Exchequer of freezing child benefit in 2013-14 is no less than £1 billion. Looking back, I think that that was also the point at which the Chancellor should have said that he was going to freeze the age-related allowances. If that had been presented in the same context, with those in receipt of child benefit having their benefit frozen at the same time as those in receipt of age-related allowances had theirs frozen, I do not think that there would have been a row about it as there has been this time.
That is the background, so how were we able to end up with the Government effectively launching an attack on hard-working families with children? The Government have got themselves into a mess because they have not complied with their own policy of properly discussing the issues in advance of introducing measures. An interesting document, “Tax policy making: a new approach”, was produced immediately after the election. It was issued by the Treasury in June 2010 and in the preface, my hon. Friend the Exchequer Secretary said:
“I want a new approach to tax policy making; a more considered approach. Consultation on”
tax
“design and scrutiny of draft legislative proposals should be the cornerstones of this approach.”
Mr Ward
Does the hon. Gentleman agree that his call for a wider debate is necessary because universal benefits are often not universally claimed? That adds another complication to the issues that he raises. I know of two schools in areas of equal deprivation. The percentage of free school meals at one is 25% whereas at the other it is 53%, yet the levels of deprivation are equal in both areas. The issue is very complicated.
Mr Chope
It is complicated, particularly as free school meals are obviously not a universal benefit. Child benefit has a 96% or 97% take-up rate, and the Government’s proposals in the Finance Bill are designed to reduce that take-up rate. A number of people might opt out of receiving child benefit, so it will no longer be a universal benefit. As the hon. Gentleman says, if we want a debate about universal benefits, let us have one, but let us do so in the context of a Green Paper, some draft legislative proposals and so on.
In December 2010, in response to the consultation on the issue of a new approach to tax policy making, my hon. Friend the Exchequer Secretary said:
“This new approach is vital to the Government’s aim of restoring the UK tax system’s reputation for predictability, stability and simplicity.”
There it is: simplicity. We are now talking about employing, on my estimate, between 500 and 1,000 extra staff in order to claw back child benefit to the extent of £1.5 billion from 1.2 million households. How complicated and complex is that? One has only to look at the detailed figures produced by the Treasury in connection with the Budget and to read the report of the Institute for Fiscal Studies to realise that it is incredibly complicated. That is why my right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley) said in the media not long ago that when he was a Treasury Minister, he was asked to consider this issue on a number of occasions by Treasury officials and he always reached the conclusion that one could do something with child benefit but not in a way that was fair and equitable. The Government have come up with a proposal that is not fair and equitable.
We know that the Government are relying on getting £1.5 billion in income from the measure and I realise that it is very difficult at this stage, when the Budget and the sums have been done, to move amendments that are in order to try to show how an equivalent sum could be raised in an alternative way. If the money was not all being raised from the people being targeted at the moment and there was a proposal to increase the contributions of some other people, such an amendment would be calling for an increase in tax and so could not be tabled by a humble Back Bencher under the Standing Orders of the House. Notwithstanding that, however, I hope to refer briefly to another way in which an equivalent amount of money could be raised by the Exchequer, which would be much fairer and simpler and which might find favour with a surprisingly large number of people if put out to consultation.
Let me conclude my comments on the lack of advance consultation on the child benefit measures. I think that some draft clauses should have been published and discussed. The Government had been thinking about the measures since October 2010 and, contrary to what they had said they would do, they did not produce any draft clauses for consultation, so we are effectively left to scrutinise a Bill that was published during the recess. We have had two weekends to look at it and this Thursday we will have to decide on all the amendments on child benefit in what will probably be, at most, a three-hour debate, under the timetable motion that the Government seek to impose on the House.
I urge my right hon. Friend the Chancellor, when he considers next year’s Budget, to revisit his proposals for having a better system with a lot more consultation. With such a consultation, I do not think we would be in our present difficulties with the VAT on static caravans, the removal of the pensioner age-related allowance, the capping of tax relief on charity donations and so on. The Chancellor and his Treasury team must be pretty concerned about the adverse publicity that has followed the Budget, but all those difficulties could have been avoided if the team had been a bit more trusting of their fellow parliamentarians and had shared information on these measures before the final decisions were made.
The consequence of the proposals on child benefit is that 1.2 million of the 7.9 million families receiving child benefit will lose out. Some 70% of those families will lose the full amount whereas others in the band between £50,000 and £60,000 will lose some if not all of their child benefit. Why do the Government want taxpayers with children to make a greater contribution towards deficit reduction than those on equivalent earnings without children? I have asked that question a number of times in the House but I have never had a satisfactory answer.
I want to put forward an alternative proposal in this public forum. There are about 2 million people earning more than £60,000 a year in this country. I have here some figures from a response to a parliamentary question that was asked on 27 February 2012, column 63W, which gave the number of taxpayers in 2010-11 in detailed income bands. The figures suggest that there were about 1.85 million taxpayers with incomes of more than £60,000 in 2011. The Library note that I have says that the information in HMRC table 2.5 and on the rate at which people’s incomes are increasing suggests that there will be around 2 million taxpayers with incomes over £60,000 in 2011-12. Those are the people I thought the Prime Minister and the Chancellor of the Exchequer had in mind when they said that those on higher incomes should make a larger contribution to deficit reduction.
All those people—the best part of 2 million taxpayers—could each be charged £1,000. That would generate £2 billion and at a stroke we would be free of interfering with the universal child benefit and would be free of being accused of picking on people with children rather than people without children. It would remove at a stroke the need to employ all the extra civil servants needed to administer a system that will be very complex, particularly in relation to those earning between £50,000 and £60,000 a year. It would also remove the administrative burden of having to introduce into the tax system definitions of couples living together—that is already a nightmare in the benefit system, so why introduce it into the tax system? I do not think the measures have been thought through, but rather than being negative about them, I am saying to my hon. Friend the Minister that I hope the Government will reconsider this issue between now and Report and perhaps consult on the possibility of asking, “Why don’t all those people earning over £60,000 a year make a contribution of £1,000 and thereby collectively generate £2 billion in income for the Treasury in the next financial year?” Incidentally, that would also remove the need to interfere with age-related allowances because the yield would be slightly larger.
I do not have any personal interest in this issue now because my two children are past the age at which they enabled their parents to qualify for child benefit, but if we were to bring this down to Members of the House, I ask why a colleague of mine with one, two, three or four children on a parliamentary salary should be forced to forfeit child benefit or have a child benefit charge, which may run to several thousand pounds a year, placed upon them while I, who no longer have the responsibility of having children in school, do not make a contribution. It just does not seem fair to me. There is a fairer way to do this.
When I originally raised my idea with the Chancellor of the Exchequer he said, “Who wants to start increasing the higher rate of tax?” but we do not need to do that because, fortunately, the Treasury has come forward with a form of introducing an arbitrary extra charge—a fixed sum, which is effectively a tax—that comes into play as soon as somebody’s income passes a particular threshold, which would be £60,000 in this case. That would enable us to avoid a situation in which 670,000 households with a family income of more than £60,000 will retain some or all of their child benefit while single-parent households on £60,000 will lose everything. I do not have the figures to hand but there are tens of thousands of single-parent households.
Given the additional disincentives that will result from the introduction of the measure, I hope that Treasury Ministers will think again about the wisdom of what they plan to do. There could be perverse consequences as people try to avoid the charges. There could be all sorts of hard luck stories. A person earning £60,000 or £70,000 might take pity on a widow with several children and go to live in her house. They would then find that they had to pay the charge, because they were earning more than £60,000 and living with someone who was in receipt of child benefit. Is that really the sort of message the Government want to send? I do not think it is. We want to keep the tax system simple. We want to promote the importance of families with children and recognise their extra responsibilities, not penalise them in the tax system.
John Mann (Bassetlaw) (Lab)
What a shambles! What a catastrophe! I refer not to this debate, but to the career prospects of the Chancellor. He went into the Budget as the man destined, in his eyes and others’, to be the next leader of the Conservative party, and he departs from it with a shambles around him.
I thought a bit of sympathy would be in order and I wanted to demonstrate to the Chancellor the impact of his Budget, so the week before Easter, I offered him the opportunity to visit a caravan in Chapel St Leonards. I was prepared to bring in some cheap lagers—the type that I know he likes—from the supermarket, and to cook him one of his favourites: the sausage sandwich. There has been a lot of concentration on the pasty, but the humble sausage sandwich, never before taxed in this country, is now to attract VAT when provided at outlets across the country. The Minister is shaking his head—he does not know the proposals in the Budget. The sausage sandwich cooked hot by the bakers across the country and cooling down below the ambient temperature is VAT-able under the Government’s proposals.
John Mann
I awaited the Chancellor’s response to my offer. Was it the brown sauce, was it the red sauce or was it no sauce at all? That was taxed with VAT at the last Budget. [Hon. Members: “Give way!”] The Chancellor had the opportunity. The caravans in Lincolnshire that people rely on for their English holidays are to be taxed as well, for the first time. The Chancellor chose not to respond.