Finance (No. 4) Bill

Frank Dobson Excerpts

Monday 16th April 2012 Commons Chamber

[Danny Alexander]

Very simply, for the reason that I have given several times today. We are raising five times more from the same group of people, which helps us to deliver the policy which we firmly believe is the best way to support working people on low and middle incomes and help them to keep more of what they earn.

[Frank Dobson (Holborn and St Pancras) (Lab)]

Will the Chief Secretary give way?

[Danny Alexander]

No. I have been speaking for a long time, and I am going to make some progress now.

We have set ourselves the goal of raising the personal income tax-free allowance to £10,000. Clause 3 increases the personal allowance this year to £8,105. Together with the previous increase, that will lift more than a million low-income earners out of income tax completely. Moreover, we are going further and faster. In the Budget we announced the largest ever increase in the amount that people can earn tax-free—an increase, from next April, of £1,100 to £9,205. That tax cut will be worth £3.5 billion every year to working families. It will benefit more than 23 million people, and will be worth £220 in cash terms and £170 in real terms to every basic rate taxpayer. That is the biggest income tax cut for a generation. Taken with the previous increases, it means that this coalition Government will have halved the income tax paid by someone who works full time on the minimum wage, and lifted 2 million people out of tax altogether. We are living up to our commitment to support hard-working people and families across the country.

We are also reforming the age-related allowances available to those born before 6 April 1948. We recognise that pensioners need additional help, which is why we introduced the triple lock on pensions. The basic state pension will increase by 5.2% in April 2012, which is £127 more than was planned by the last Government and which constitutes the largest ever cash increase. Under our plans for age-related allowances, no pensioners will lose out in cash terms. Instead, given the huge increase in the personal allowance and the reduced difference between it and the age-related allowance, we will simplify the system. Those born before 6 April 1948 will benefit from the age-related allowance or the personal allowance, whichever is greater. That change will remove, in time, the complicated taper which the Public Accounts Committee called

“complex and hard to understand”.

This is a substantial Bill. It demonstrates the ambition that we need to secure a tax system and an economy that are built on fairness, that reward hard work, and that restore our private sector’s competitiveness. Even with that scale of ambition, however, the Bill makes substantial progress in simplifying our tax system and living up to our commitment to improving the way in which the Government develop tax policy. More than 75% of the measures in the Bill were announced in the 2011 Budget, with more than 400 pages of legislation published for consultation and more than 450 comments received in return. Through that openness, transparency and consultation, we are committed to building a simple and stable tax system that is easy to understand and easy to comply with. That is why we are addressing a number of loopholes and anomalies in the VAT system—introducing an anti-forestalling charge in clause 195—and why the Bill cuts large swathes of the tax code by implementing recommendations from the Office of Tax Simplification. I thank John Whiting and his team for their excellent work in that regard.

The Government are taking decisive action to restore our stability and return the country to prosperity. Our No. 1 priority remains dealing with the last Government’s legacy of crippling deficit and debt in a fair and sustainable way. Through this Finance Bill, we are continuing to ensure that the richest carry the heaviest burden. We are supporting businesses so that they can restore our global competitiveness, and we are supporting hard-working families on low and middle incomes. I commend the Bill to the House.