Amendment of the Law

Edward Leigh Excerpts

Wednesday 21st March 2012 Commons Chamber

[Mr Edward Leigh (Gainsborough) (Con)]

It is a pleasure to follow the hon. Member for West Bromwich West (Mr Bailey), who always makes his arguments well. I apologise for the fact that I cannot stay for the whole of the rest of the debate; I wish to attend the memorial service downstairs for David Atkinson. I will take this opportunity to pay tribute to him on the Floor of the House. He served the House with tremendous distinction for many years, particularly in the Council of Europe. He was particularly hard-working on promoting democracy throughout Europe.

I see my neighbour, the hon. Member for Great Grimsby (Austin Mitchell), on the Opposition Benches. We have been in the House together for a long time, and we have heard many Budgets. I said to my wife this morning, “We have heard so many Budgets. Will this be just another Budget that takes with one hand and gives with the other?” but I think it is a very courageous Budget that is rather different from many that I have heard. I have sat through so many—from Nigel Lawson, John Major and the previous leader of the Labour party.

The Budget is courageous for two reasons. First, my right hon. Friend the Chancellor is persevering with dealing with the deficit, which is the greatest problem that we face. Politically, it is in the interests of the Labour party to claim that we are indulging in a tremendous campaign of cutting everything in sight. One of the problems that it faces is that it knows perfectly well—as do the public—that, if it had remained in power, as it very nearly did, it would have done much the same as us. It is also politically convenient for the Government, of course, to proclaim that they are taking difficult decisions, but we are probably not cutting public expenditure enough to keep interest rates low. We are cutting what would otherwise have been a runaway increase in the deficit, and that is very different indeed.

The decisions that the Chancellor faces are extraordinarily difficult, and he is conducting himself very well. I have watched him ever since he was a freshman Member of Parliament, serving on the Public Accounts Committee. What he is achieving, both on the deficit and on many other things, is important and courageous. The other brave thing that he has done today is deal with the issue of the 50p top rate of tax. I know that that is not necessarily populist. I listened to the speech by the Leader of the Opposition, which was very good, and afterwards I congratulated him on it. It was good politics, and it appealed to his people, but the question that the Labour party has to ask itself is: does it want its leader to give a speech that appeals to his core supporters, or a speech that addresses the real problems of the country? This is the problem in respect of the top rate income tax payers: the top 1% of taxpayers pay about 28% of total taxes and they are highly mobile in the way that they conduct their lives and their businesses, and simply imposing a 50p tax—which Tony Blair and Mandelson resisted year after year—does not actually achieve anything for the economy. It may be good Labour politics, but it does not achieve anything for the economy. As we heard from the Chancellor today, it is only giving us about £100 million. Therefore, although this measure may not be popular, it has to be taken if we are to revive entrepreneurship.

The task facing the Chancellor is very difficult and complex, but he has set about it in the right way. He is trying to close many of the tax loopholes. The difficulty here, however, is that we do not want the very rich just to bury their money in the ground. Instead, we want them to be “white knights”, to set up businesses and to become entrepreneurs. Indeed, many of the so-called tax avoidance schemes were designed by previous Governments to encourage the rich to invest in business.

The Chancellor has also taken a brave decision on child benefit. I was critical of his original proposals, although I understand why he suggested them. There was the overriding need to deal with the deficit, and his child benefit reforms were going to save £2.5 billion. There was also a desire to “detoxify” the Tory brand, and to attack higher income tax payers. There may have been some pressures within the coalition, too. However, we all know that the Chancellor’s original proposal would, as it were, have created a cliff edge and would have been fundamentally unfair, because the situation would have been very different for a family with one higher tax earner than for a family with two taxpayers whose earnings are just below the £41,000 limit.

The Chancellor has taken the courageous and right decision to try to deal with that problem, but we still have a long way to go, and I believe that a better way forward would be to have a tax allowance. That would solve the problem of the higher income tax payer family. In France, instead of getting child benefit, couples are given a family tax allowance, which is spread between themselves and their children, irrespective of their income. An adult counts as one unit of tax allowance, and children count as half units. Therefore, a married couple with two children are given three units-worth of tax allowance. As a result, the level of income at which they start to pay tax is higher than it would be in Britain. That system has the added advantage of addressing the perverse incentives against family life and couples staying together.

I will continue to argue that the Government must fulfil their pledge to recognise marriage in the tax system. Critics of my arguments often say, “Just a little tax break isn’t going to make people get married or stay married.” That is perfectly true, but what we currently have is almost a perverse incentive against family life. A married couple where one parent stays at home to look after the children are hugely more taxed than almost any other taxpayer. We do not want to create a tax break for marriage because we think that that alone will deal with the wider problems; we just want to right an injustice.

The Chancellor has remained true to the overriding need to have a fiscally neutral Budget and to attack the deficit, has demonstrated a determination to promote entrepreneurship even if that means taking unpopular decisions, and has courageously recognised that he may have made a mistake on child benefit and that he should try to reform the system in a more equitable way. Although the Budget may not be popular with everybody, it is certainly a good Budget, and the right Budget for the nation.