Taxation of Low-income Families

Debate between Fiona Bruce and Steve Double

Wednesday 16th January 2019 Westminster Hall

[Steve Double]

I very much welcome that intervention: the hon. Gentleman makes a powerful point. I do not believe for a minute that the Government set out with the intention of ending up in this position, in which families face effective marginal tax rates of 75% or 80%. No one intended that to be the case, but the hon. Gentleman is right to say that that is the situation and that, if that was not the intention, surely it is time to look at it and see what steps we can take to reverse and undo it.

As I said, the introduction of universal credit was a huge step in the right direction and very welcome. It is not perfect; it is not without its challenges, but I very much welcome the Government’s approach to the roll-out of universal credit—to take their time, learn, and adjust and amend as necessary. Fundamentally, universal credit is the right change to make to our benefits system, and I very much welcome the way the Government are rolling it out.

One purpose of universal credit was to ensure that work paid and to reduce the disincentive for people to take on extra work and lose benefits. I saw that myself, before coming to this place, as an employer. I am thinking of the number of times that I approached my staff to offer extra hours of work and they just said to me, “There’s no point, Steve, because I will lose tax credits. There is no point in me working longer and harder to be no better off—all I will be doing is giving the extra money to the taxman.” Universal credit has been a big positive step, a step in the right direction, to remove that disincentive, and that is hugely welcome, but we need to recognise that there is still a disincentive in the system. It has been highlighted and now is the time to address it.

I also hugely welcome the Government’s policy of increasing the personal allowance. That has taken many of the lowest-paid people in our country out of the tax system—out of paying tax—altogether. That has also been the right thing to do and is very welcome, but as we are saying, it does not undo the situation that we now have. Under the current arrangements, there are those who are paying marginal tax rates of 75% if they are homeowners, and 80% if they are renting, and on universal credit. We cannot expect people to be incentivised to take extra work if they will get to keep only 20p or 25p in the pound for the extra work that they take on.

I therefore very much welcome the report that has been published today. I urge the Government to consider it carefully and look at what can be done to review the current situation. I very much welcome the suggestion from my hon. Friend the Member for Stafford that we need to set as a target bringing the UK in line with the OECD average. It seems crazy for the United Kingdom, which is renowned around the world for the effectiveness and competitiveness of its tax system, to be so out of step with the average for the other developed countries. We should set a target that, in an achievable but relatively short space of time, we will seek to reverse the situation and bring ourselves back in step with the OECD average.

We need to change the mindset that the only way to tackle the problem is through the taper rate for universal credit. That will get us so far, and I am sure that any amendments that can be made in that respect would be welcome, but really we need to bring our tax and benefits systems into line with each other.

[Fiona Bruce]

It is interesting to note that if the taper rate is altered to 50p, when universal credit recipients start to pay national insurance or income tax, they will still face a 66% effective marginal tax rate.

[Steve Double]

My hon. Friend makes the point well. Although changes to the taper rate will be welcome, they will go only so far. We need to change this system: in the benefits system, families are treated as families, yet in the tax system, people are treated as individuals. That is where the conflict comes. I would very much support any move to treat families as families in the tax system, by allowing some measure of transferrable tax allowance, which enables families to be seen as a whole rather than as individuals. We have the same situation with child benefit. It seems crazy to me that in the child benefit system taxpayers are treated as individuals rather than as families. That seems to be an anomaly we need to address.

I want to put my weight behind the point that this is not just about children. There are huge benefits that we can gain as a country by helping families to look after their elderly relatives and supporting them in the tax system. If we can do that by making some element of the personal tax allowance transferrable—for example, for a family that chooses that one of the taxpayers will stay at home, rather than work, in order to look after an elderly relative, who otherwise would put pressure on our adult social care system—it would be a huge, positive step. It would be better not only for that elderly person and that family, but for our adult social care system, which, as we all know, is under so much pressure at the moment. One answer to that pressure is to enable families to care for their elderly relatives much more, rather than just handing them over to the state and expecting the state to do it all. The Government would do well to consider that. I think it would make a huge, positive contribution to resolving the challenges we face.

I have huge respect for the Minister. When he entered the Chamber today, I was glad to see that he did not have his notes hanging out the top of his folder. I am sure he has been listening and will take a positive message from this debate back to the Chancellor of the Exchequer and the Treasury, and tell them that there is something we can look at here and take positive steps on, which would bring huge benefits to families across the country and to our economy.

Taxation: Beer and Pubs

Debate between Fiona Bruce and Steve Double

Tuesday 31st October 2017 Westminster Hall

[Steve Double (St Austell and Newquay) (Con)]

It is a pleasure to speak in this debate; I congratulate my hon. Friend the Member for Dudley South (Mike Wood) on securing it and on his excellent opening speech.

I have the incredible honour and privilege of representing the constituency that contains St Austell Brewery, which since 1851 has been brewing high-quality beer in the centre of St Austell under the ownership of the same family. It now enjoys incredible success and exports a number of its brands around the world.

The three years of beer duty cuts and the subsequent freeze were incredibly positive, not just because of the money they saved on the cost of a pint of beer, but because they sent the brewing industry the clear message that the Government backed it and were behind it. That gave brewers the confidence to plan for the future and invest in products, plant and machinery to grow their businesses and the market. Unfortunately, the rise in the retail prices index earlier this year has undone virtually all the good work of the cut and freeze years and has sent a negative message to the industry.

I encourage the Minister to take back to the Chancellor and the Treasury the strong message that this year we really need at least a freeze in the beer duty, to restore confidence in the industry. We are a Conservative Government, after all; we believe in low taxes, and we know that punitive taxes do not work. Cutting, or at least freezing, the beer duty will allow the sector to continue to grow, with more and more jobs being created.

I must also mention the small breweries’ relief scheme for brewers who produce up to 60,000 hectolitres a year—I did not know what a hectolitre was until a couple of days ago, but there we go. That threshold is clearly acting as a brake on small breweries that prevents them from investing and growing beyond it. Some form of tapering would be very welcome, because we have created a squeezed middle—brewers who are just above the threshold but are paying much higher rates of beer duty. I believe it is time for a review, and I ask the Government to work with the industry to get an overall view of small breweries’ relief and see whether the limit can be increased.

[Fiona Bruce]

Does my hon. Friend support my request that the Minister consider applying small breweries’ relief to cider producers, who do not enjoy that advantage at present?

[Steve Double]

I absolutely agree that cider should be considered for the relief as well.

The Budget gives us an opportunity to send the clear message to the brewing industry and our pubs that we back them, we understand how essential they are and we need to take action to support them.