Finance (No. 2) Bill

Fiona O'Donnell Excerpts

Thursday 18th April 2013 Commons Chamber

[Fiona O'Donnell (East Lothian) (Lab)]

It is a pleasure to serve under your chairmanship this morning, Ms Primarolo—[Interruption]. We have just made it into the afternoon. It is also a pleasure to follow my hon. Friend the Member for Newcastle upon Tyne North (Catherine McKinnell), who made such a strong case for the Opposition’s amendment to clause 1. It is to clause 1 in the main that I wish to address my remarks.

This week and in the days leading up to the funeral of Baroness Thatcher, Government Members have been proud to proclaim themselves as Thatcherites—no more talk of one nation Conservatives or how “We’re all in it together”. I was pleased that my hon. Friend spoke about the impact of this Government’s choices. That is what we are talking about today: their choices and priorities. Proportionately, they are hitting women so much harder than men, while the benefits they are seeking to give—reducing the 50p tax rate to 45p—will disproportionately benefit men.

That was certainly my experience as a woman at home caring for my children through the Thatcher years. I find it almost incomprehensible when I hear people talk about how much she did for women, because that was not my experience, as I genuinely struggled to put food on the table for my children and keep a roof over their heads. For me, the difference we saw in 1997, with the birth of a new Labour Government—new in every way—was predominantly in the increase in child benefit. That is what changed my ability as a mother to care for my children—to provide for them and give them a better life than I had had. This Government have chosen to freeze child benefit, while at the same time giving a tax break to 13,000 millionaires and 267,000 people earning more than £150,000. I would be interested to hear from the Minister—or from other Government Members, if it is not just the Minister who is going to speak on this issue—how many people earning more than £150,000 have come to his surgery or contacted his office to say that times are so tough that they need a tax break. How many people have contacted the Treasury to say that?

[Sheila Gilmore (Edinburgh East) (Lab)]

During this week, from Second Reading onwards, we have seen a dearth of speakers from the Government Benches, yet we have also seen a rise in unemployment figures and clear signs that on average people are facing real cuts in their earnings. Is it not extraordinary that Government Back Benchers seem not to want to speak?

[Fiona O'Donnell]

As ever, my hon. Friend makes a reasonable and forceful contribution to the debate. This is shocking complacency from Government Members—their constituents and mine will be watching them—as unemployment rises and as families face an average cut of £17 a week as a result of all the changes they have made since 2010.

[Kerry McCarthy (Bristol East) (Lab)]

I might be pre-empting what my hon. Friend is about to say, but with these measures are we not seeing a return to the discredited policy of trickle-down economics, whereby the Government think that if we give more money to the wealthy, they will spend it and boost the economy? However, we know that they are less likely to spend the extra money going into their accounts, whereas people at the bottom, who are really struggling to get by, will spend the money we give them. If we are looking at the economic impact, it is better to give that money to the poorer people.

[Fiona O'Donnell]

Absolutely, and I thank my hon. Friend. I was not about to turn to that point, but I will develop it as it affects the local economy in East Lothian.

East Lothian has a number of small towns, some of them market towns. Often, it is the poorest in those communities who spend their money in local shops in the high street; they are not able to take advantage of out-of-town supermarkets. Those high streets are struggling. The Government are taking money out of local economies—out of small high streets in East Lothian—which is having a negative effect. One group of businesses is, however, growing in our high streets: pawnbrokers and high street lenders, which will not improve the lot of the most vulnerable in my constituency.

[Ian Lucas (Wrexham) (Lab)]

That point about our high streets is incredibly important. It is not simply high streets in Labour constituencies that are suffering. Anyone who attends the meetings of the all-party group for town centres will know that, even in leafy Conservative and, dare I say it, Liberal Democrat seats, high streets are struggling. What evidence is there that the windfall for the richest people in our society will contribute in any way to income in our high streets and in our economy? The money is more likely to be spent in Bermuda than in Birmingham.

[Fiona O'Donnell]

My hon. Friend makes an excellent point. The problem is not restricted to high streets. In small rural constituencies, there may be one village shop, where the local post office is located. The post office network is also being put at risk as such small village shops are unable to make a profit. Therefore, we risk losing post office services. We are facing that now in East Lothian. Post office closures may not be planned, but that may be a consequence of the Government’s economic choices.

It seems almost too simplistic to make this point, but Government Members have boasted about the fact that the Government are hurting the richest 10% the most. However, if the Government choose to take £25 a week from a rich family, it will have a lot less impact than taking £17 a week from a hard-working family. Taking that from the richest will not mean they will present themselves at food banks looking for assistance to put food on the table, but that is what the Government are forcing working families increasingly to do. We look forward—that is perhaps the wrong term—to hearing the Trussell Trust’s latest figures on the number of people it has fed over the past year. All the indications are that the number has increased significantly; it may be over 500,000. That is a matter of real concern.

[Robert Flello (Stoke-on-Trent South) (Lab)]

I am enjoying my hon. Friend’s speech immensely. On that point, just last Thursday, the food bank in Fenton in my constituency had its highest number of visitors yet— 19 people turned up, whereas normally about eight or nine do so. That is a growing trend on top of a growing trend.

[Fiona O'Donnell]

I am sure that Members on both sides of the House are seeing that in their constituencies. I hope that Government Members will visit food banks in their communities to understand the causes of food insecurity. As my hon. Friend the Member for Newcastle upon Tyne North said, it is about the choices the Government are making and their priorities. Earlier we heard the most uncomfortable and distorted logic: when the economy was growing, unemployment was falling, we were investing in health and helping young people into employment, the Labour Government should have taken more money from the rich through a 50p tax rate, just for the sake of it; but when the economy is flat-lining, unemployment has just risen again, poverty and the gap between rich and poor are increasing, it is the right time for this Government to give a tax break to people earning over £150,000. I cannot follow that logic.

The Joseph Rowntree Foundation has estimated that almost 2.5 million families on low incomes will pay £130 more in council tax this year, adding further to the squeeze that working families are suffering. This Government have made their choice, and I think that, as they drive towards the next general election, if they glance in the rear-view mirror, two hazards will make them fail the electoral test. The first is their decision to scrap the 50p rate of tax. The second is their choice to introduce a bedroom tax at the same time. There is a family in Wallyford in my constituency, the Anderson family. Mr Anderson is a full-time carer for his wife, who has a severe form of epilepsy. He is saving this country a small fortune by caring for his wife, but he does it because he wants to, not because he has to. There are times when he needs not to sleep in the same room as his wife—I have his permission to discuss his case in this amount of detail—and he needs to be able to make that choice. He also has a son with spina bifida, who is now enjoying a degree of independence and living away from his family, but he can maintain that independence only by returning home for about three days a week when the weather is bad. Recently, he has been at home for longer—so that bedroom is needed for Mark and his equipment.

I feel ashamed that Mr Anderson should have to come to see me to ask why the Government are choosing to give money to people who are not even asking for it, when he is going to be taxed for having that bedroom. And it is a tax; when the Government take money out of people’s pockets, that is a tax. This Government are choosing to make life much more difficult for a man who has given up work to care for his wife and to support his disabled son and enable him to live as independent a life as possible. That says a lot about the Government’s approach, and it does not surprise me that Government Members are not seeking to contribute to the debate today.

[Jonathan Edwards]

The hon. Lady will be aware that the tax cut for people earning more than £3,000 a week was introduced in the last Finance Bill. Members of the parliamentary Labour party abstained in the vote on that Bill. She has made some pretty strong comments today. Is she now saying that that abstention was a catastrophic political mistake?

[Fiona O’Donnell]

No, I am not. I would say that the catastrophic political mistakes are most often made on the nationalist Benches. We are stating clearly that, if we were in government today, we would not be scrapping the 50p rate. There is no ambivalence or doubt about that. That is the position of Labour Members in the Chamber.

I appeal to Liberal Democrat Members to remember their Lib Dem values, and to all Government Members to think about the people who are contacting them. Are they the people who earn more than £150,000 a year, or are they the families and pensioners who are struggling with the cost of daily living? I urge Government Members to vote according to the representations that they are receiving.

[Jacob Rees-Mogg (North East Somerset) (Con)]

It is a particular pleasure to serve under your chairmanship today, Ms Primarolo. I welcome you back, and I am glad to see you in fine health.

I have been spurred on by the hon. Member for East Lothian (Fiona O’Donnell) to speak in the debate and to defend the Government’s policy, which is wise and right and good—[Interruption.] I do not often cheer up the Whips, but if I do so, that will be an added advantage. The amendment tabled by Her Majesty’s official Opposition is completely unnecessary and wrong-headed.

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[Jacob Rees-Mogg]

Ms Primarolo, your answer to the debate would be so fine that it would hold the rest of us silent.

The hon. Member for Edinburgh East (Sheila Gilmore) is absolutely right. It is difficult to say at exactly what point on the Laffer curve revenue is maximised. As I understand it, however, the latest academic studies suggest that around 37% is the level at which income tax revenues would be maximised. That is why I would favour the Government going further and reducing the rate of income tax to the level at which it was kept by the Labour party when it was in office.

[Fiona O’Donnell]

I did not think that I had spurred the hon. Gentleman to speak; given his posture during my speech, I thought that I had woken him from his slumbers. Do we have another split in the coalition here? Lib Dem Members have been criticising the previous Labour Government for not having the 50p rate for longer.

[Jacob Rees-Mogg]

The coalition is, I am sure, united at the highest level, but that does not mean that Back Benchers do not sometimes disagree. My hon. Friend the Member for Bristol West (Stephen Williams) and I often discuss these matters, and we do not invariably agree on every aspect of them. The Lib Dems have their own particular policies, which they will no doubt put forward in an election campaign, but the coalition at large is committed to a single policy.

I want to come back to the amendment, which is about getting back to the 50p rate. We already have a situation in which the top 1% of taxpayers pay nearly 28% of the total income tax receipts—that is, £50 billion. If the rate of tax is put up to too high a level, people will change their behaviour to alter the amount of tax they pay. That is very straightforward, and they can do a number of things. Some people leave the country, so that their tax is paid overseas. Some work less hard, reducing their earnings to reduce their tax payments. Some use pension funds or legitimate forms of tax avoidance to minimise their income. That is all perfectly well known by those on the Opposition Front Bench, who are a fine and intelligent group of people, yet they try to make political points on the argument about fairness. Fairness seems to me to be about doing what is right.

--- Later in debate ---

[Jacob Rees-Mogg]

I am always doubtful when people are sniffy about jobs that people take. I and others in the Conservative party voluntarily go around knocking on people’s doors trying to sell them party policies. That is known as canvassing, and I wish I got paid for that activity, but I do it out of the goodness of my heart. I do not think one should be sniffy about jobs that people might apply for; they are all welcome and all valuable.

[Fiona O'Donnell]

The hon. Gentleman is completely out of touch on this point. The point is not that people are being sniffy, picky or choosy about jobs. The point is that someone might live in Edinburgh East while the job is in Fife, and we do not all have drivers and chauffeurs to take us to Fife to do the job.

[Jacob Rees-Mogg]

I wish I was in this fortunate position of having a chauffeur or driver to take me to Fife to get a job. When I tried for a job in Fife in 1997, I was distinctly unsuccessful, and came back to a job in London, but that is slightly beside the point.

The overall point is that income at whatever levels has a determinant effect on the employment people seek and the work they are willing to do. That applies to benefits— paying benefits at too high a level can create a benefit trap that makes it not worth while for people to apply for jobs—and it applies very clearly to high tax rates when people decide not to earn.