Tax Fairness

Duncan Hames Excerpts

Tuesday 12th March 2013 Commons Chamber

[Chris Leslie]

Yes—especially on issues such as the bedroom tax, tax credit cuts and increase in VAT. Of course, let us not forget the tuition fee decisions that the Liberal Democrats have made. That is a matter for them, however. They must account to the electorate and they must go back and explain how they have voted today.

Let me say a little about how we would use the money raised from the mansion tax. Our view is that a fair tax system should include a 10p starting rate of income tax. We support the increases in the personal allowance, but a 10p band would mean a different tax rate for those on middle and lower incomes from that for those on higher incomes, helping the move towards a fairer tax system. Some argue that the 20p rate is adequate, but I believe that a steadier incline moving from zero tax to 10p and from 10p to 20p could be the bedrock of a more progressive tax system, sending out an important signal that tax cuts for working people are a priority.

The 10p starting rate would provide a tax incentive to enter work, especially for those on lower wages. It was a mistake to remove the 10p rate in 2007, even though it enabled the then 22p basic rate to be reduced to 20p, where it stands today. Reintroducing a 10p rate would be the right thing to do and, if the Liberal Democrats are correct that the mansion tax could raise £2 billion, the Chancellor could make that change next week in the Budget.

Just as there is support for a mansion tax from Members on the Government Benches, there is ample support for the return of a 10p starting rate for income tax, although strangely some of those Members have chosen not to take their place in the Chamber today. The hon. Member for Harlow (Robert Halfon) spoke about the 10p rate idea in his recent Adjournment debate, arguing that

“restoring the 10p rate would help the coalition to counter the war cry of its political opponents that it is only interested in cutting taxes for millionaires. It would prove to the public that ‘lower taxes for lower earners’ is not just a soundbite but that it can be a reality…the policy would be popular…it would be a symbol of the Government’s economic mission and…it would help to tackle the desperate stagnation in incomes that Britain has suffered”.—[Official Report, 22 January 2013; Vol. 557, c. 34-38WH.]

That argument was made by a Conservative Member.

[Duncan Hames (Chippenham) (LD)]

The hon. Gentleman is right that the previous Government were mistaken to scrap the 10p rate, but under this Government the income that would previously have been charged at the 10p rate is now charged at a 0p rate. If he supports the increases in the personal allowance, why is support for those increases totally absent from his motion in a debate on tax fairness?

[Chris Leslie]

We wanted to focus on the mansion tax proposition, because the hon. Gentleman’s Business Secretary suggested that we keep the motion simple and that if we did so, the Liberal Democrats would support it. That is what the Business Secretary said. We support the changes to the personal allowance, but in our view it is important to have that graduated step up. People go from the zero rate to the 20p rate and it is important to consider introducing a more graduated step as a work incentive, which is something we ought to have in the system.

[Duncan Hames]

Why does the hon. Gentleman think that a 10p tax rate is a greater incentive to go into work than a 0p tax rate?

[Chris Leslie]

The hon. Gentleman seems to think it is all or nothing, but we think that a progressive tax system argument needs to be developed. If people move from paying zero tax straight to 20p, there is a cliff edge. We think it is important to consider smoothing the transition to work and making work pay more effectively. That is not part of the motion; it is our preference for what we would do with the revenues from the mansion tax.

[Duncan Hames]

rose—

[Chris Leslie]

I will give way to the hon. Gentleman once more, if he wants to say whether he agrees with the text of our motion—not the flim-flam about the amendment. Does he agree with the text of our motion?

--- Later in debate ---

[Duncan Hames]

I will be voting for the amendment; it states Liberal Democrat policy, which I support. The hon. Gentleman has accepted that he wants to do something very different from us with his mansion tax, and on that basis I am not happy to support him.

[Chris Leslie]

What more can I say? I thought the hon. Gentleman supported the proposition in our motion, but clearly he does not. However cynical and defensive he may feel, Liberal Democrats should at least acknowledge that a principle of fair taxation is at stake today, and that it ought to transcend party differences as we try to create a more just society.