Amendment of the Law

Emma Reynolds Excerpts

Monday 26th March 2012 Commons Chamber

[Emma Reynolds (Wolverhampton North East) (Lab)]

Let me be clear from the outset that this is a Budget from a Government who are intent on dividing Britain, pitting the private sector against the public sector and one part of the country against another.

However, I congratulate the Chancellor on one thing: he did not divide the press on the Budget. Remarkably, he united the press in universal condemnation of its unfairness. At a time when my constituents are seeing their living standards decline, it beggars belief that the Government are prioritising a tax cut for the richest people in our country. Some 14,000 millionaires will be more than £40,000 better off. I wonder whether it is really a coincidence that many of those in the Conservatives’ “premier league” Downing street dining club have done so well out of the Budget.

I want to tackle head-on the arguments that the Chancellor has made to justify the tax cut for the wealthiest. I do not think that the tax rate should be set in stone, but any decision to change it should be based on the evidence, not on ideology.

[Ian Swales]

Will the hon. Lady give way?

[Emma Reynolds]

No.

As the Institute for Fiscal Studies has said, it is impossible to judge the effectiveness of the 50p tax rate on the basis of one year alone. Many high-income earners brought forward a lot of their income to avoid the higher tax burden. Having pored over the document by Her Majesty’s Revenue and Customs on the effect of the 50p tax rate, I can tell Government Members that it is a really good read. The conclusion is that the behavioural responses to the 50p tax rate are highly uncertain and hard to assess. When changing the tax rate, the taxable income elasticity is particularly difficult to estimate. The evidence that Government Members posit with such confidence simply is not there.

The Chancellor claims that the rich will pay five times more than they do at the moment. However, the much-trumpeted increase in stamp duty and the new revenue from behavioural change will fall short of that. He is not only living on a different planet; he is living in a different universe. If the Government are serious about shifting the tax burden from income to wealth, that is something that we will look at. However, if they are serious about it, why did the Chancellor not introduce something systematic? Indeed, why did the Liberal Democrats not push harder for a mansion tax?

The last fantastical claim by the Chancellor is that top earners will suddenly unleash jobs and growth in our country because of the tax change. That is patently absurd. It is an ideological double standard to claim that to incentivise the rich to work harder we have to make them richer, but to incentivise the poor to work harder we have to make them poorer. [Interruption.] If the Minister of State, Foreign and Commonwealth Office, the hon. Member for Taunton Deane (Mr Browne) wants to go back to the Foreign Office, it would make it better for all of us.

The Budget not only fails the fairness test, but fails to tackle the unemployment crisis that my constituents and millions of people across the country are facing. When we left office, unemployment was falling. Now, tragically, youth unemployment is at an all-time high with more than 1 million young people unemployed. European Governments in Austria and Finland have brought in a youth guarantee fund like that proposed by the Opposition.

The Budget has failed the fairness test and will create a divided Britain. The mask of compassionate conservatism has definitely slipped off. The Budget brings into sharp relief what we have known all along—it is the same old policies and the same old Tories.