Living Standards
Debate between Harriett Baldwin and Charlie Elphicke(11 years, 3 months ago)
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Harriett Baldwin
What would that community feel about a Government who left a deficit of 11.8% of GDP? This Government have reduced it by a third, to 7.4%, although there is still a long way to go. More than any community, that community would understand the importance of living within one’s means. We need to judge the Government by their track record, compared with the previous Government.
Charlie Elphicke (Dover) (Con)
The issue is not just the deficit. Real earnings did not rise from 2004 onwards under the previous Government’s mismanagement. We still see the scars of the terrible recession of 2008 in the earnings lag, which continues to this day and which we are battling to turn around.
Harriett Baldwin
I agree, so let us turn to the track record of what we have tried to do in government to tackle the very issues raised in today’s debate. We all want to see our constituents prosper and have more money each month to pay their bills. The most important bill that they have to pay each month—on pain of imprisonment if they do not pay it—is their income tax bill. In 2007, people had to start paying income tax once their income rose to just over £5,000. By the end of the next tax year, people will be able to take home £10,000 before they have to pay income tax. That is a halving of the income tax bill for the hard-working person who works full time on the minimum wage. It is also a 20% real-terms reduction in the tax bill of someone on median income. That is the action that a responsible Government can take.
Income Tax
Debate between Harriett Baldwin and Charlie Elphicke(12 years ago)
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Harriett Baldwin
I seem to recall that in my lifetime—under the Government of, I think, the predecessor but one of the hon. Member for Cardiff South and Penarth—income tax was set at more than 90%. If it were set at 100%, we should have no income tax revenue, because no one would consider it worth while to work.
I then ask my students what would happen if we lowered the rate of income tax from 100% to 70%. Would we raise more or less revenue? Again, I should welcome interventions from Opposition Members. Everyone realises that we would raise more revenue, because if the rate was 70%, we would take home 30p in the pound. I notice that the new socialist Government across the channel recently introduced that income tax rate. We will see how that stacks up over time, but I expect that it will prove to be a deterrent to additional work, too.
The motion contains the seeds of its own mathematical inconsistency, because the Opposition are extrapolating a linear relationship between the income tax rate and the amount of income tax revenue raised. They are also extrapolating that those who can, in what is a global market, take their labour to any other country in the world will not take into account any difference in tax rates between the UK and other nations, yet all the evidence shows that that is not the case.
The Labour motion refers to 8,000 people paying income tax on income of £1 million or more. In 2009-10, which is the last tax year in which we had the 40p tax rate, some 16,000 people had an income of £1 million or more. Through raising the tax rate from 40p—a rate that was in place for all but one month of Labour’s entire 13 years in office—we can see that millionaires can do other things with their income. They can take their entire labour overseas, or they can decide to shelter their income or not to take a dividend that year, or they can use any of the other methods to ensure they do not pay that increase in income tax. There was a reduction of £7 billion in revenue after the income tax rate went up from 40p to 50p.
Harriett Baldwin
I think that I have already taken two interventions, and I have only a minute and a half, unfortunately.
The Government have reduced the number of ways in which people on high incomes can reduce their taxable earnings. The Opposition opposed measures to reduce the amount people could put into their pension fund from more than £250,000 to £50,000. I also voted for the abolition of disguised remuneration, which was quite rampant under the previous Government. That also serves to limit the ways in which people on high incomes can reduce the amount of income tax that they pay.
The relationship between the rate of income tax and the amount of revenue raised by the Chancellor is non-linear. Between 0% and 100% there is a curve, and we need to agree about the optimal point on it—the point where the Treasury can get the most revenue from those at the highest end of the income spectrum. I suspect that 45p will be a lot closer to that optimal rate than 50p was.
The Government are focusing on tax cuts for those who are on the lowest incomes, lifting them out of income tax, and ending this tax cull on millionaires.
Finance (No. 4) Bill
Debate between Harriett Baldwin and Charlie Elphicke(12 years, 8 months ago)
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Harriett Baldwin
I am listening to my hon. Friend’s excellent speech with great interest because of his expertise as a tax accountant.
Harriett Baldwin
Tax lawyer even. Was he as surprised as I was at the £16 billion to £18 billion of forestalling measures taken after it was preannounced that the rate would rise to 50p?
Charlie Elphicke
Very much so. My hon. Friend makes a good point. It is also in the OBR report. These are the forestalling measures—[Interruption.] Labour assumes that people forestall for only one year and that the income will suddenly pop up the following year. That is not what really happens. Often people will take a long career break. [Interruption.] I shall give the hon. Member for Pontypridd, who is chuntering from a sedentary position—
Jobs and Growth
Debate between Harriett Baldwin and Charlie Elphicke(13 years, 2 months ago)
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Ed Balls
I will make a little more progress, but I will take interventions from people who have not intervened. Good grief, I have given the hon. Member for Dover (Charlie Elphicke) enough of the wrong type of publicity already and do not want to do his career any more damage.
There is a credible alternative. Why will the Chancellor not act? He used to be so confident that his plan was working. It is patently not working. He and his cheerleaders on the Government Benches claim that however bad things get, he is trapped by the financial markets. He cannot take the advice of the IMF and the OECD and change course because it would lead to higher interest rates and recession. However, the IMF has said that we cannot have credibility without growth.
The markets know that rising unemployment and zero growth are undermining the Chancellor’s deficit reduction plan. One chief economist in the City at Baring Asset Management said last week:
“Growth is essential if the UK is to be able to finance new debt, repay old debt and convince the markets and credit rating agencies there is a modicum of competency in policymaking. The longer we pursue current policies, the more likely it becomes that the UK will be the next target”.
That is the real market view. We know that the credit rating agencies put out their press releases, but the real view, as the IMF has told us, is that having a flatlining economy and rising unemployment is the wrong way to get the deficit down. As I said, even the Chancellor’s friend at the IMF has said that
“growth is necessary for fiscal credibility”.
Britain has no growth. That is why our Chancellor is losing credibility.
Welfare Reform Bill
Debate between Harriett Baldwin and Charlie Elphicke(13 years, 6 months ago)
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Harriett Baldwin
The hon. Lady underestimates the extent to which the 16-hour job has already become a trap. I think we all know people who have been trapped in one. I am proposing that when people move on to that slide and have greater support in those initial steps into work, they will become much more familiar with the world of work. When they move into taking on more hours and so on—let us not forget that once somebody has moved into the workplace they often find themselves eligible for a promotion or for the next move up the employment ladder, which might coincide with their children rising five and going to primary school—the fact that they are on more of a slide will mean that because they have extra work they will be able to share more of the cost of their child care. I would like to see some experimentation with the formula so that the child care support for the first steps into work is more generous, and the tapering begins further down the line.
Charlie Elphicke
Does my hon. Friend recall going to the seminar where we were consulted about the child care costs, and does she recall, as I do, that the idea that people lose out when they work more hours is a fiction? The Government are funding substantially more money for the system, which means that people will be far better off than under the current system even if they are working all hours, as well as benefiting when they are in 16-hour jobs.
Harriett Baldwin
My hon. Friend highlights the complexity of this area, not just because of the formulae and the mathematics but because of the financial behaviours of individuals who are making the choice between working and not working. This is an important behavioural area for people who are not in the benefits system. We all know people who have left work, had a baby and taken time out of the workplace. They make the trade-off and ask whether it makes sense for them to go back to work and pay for child care or not. That happens outside universal credit, in the world of people who are not touched by the benefit system in any way. This is a complex area.
Oral Answers to Questions
Debate between Harriett Baldwin and Charlie Elphicke(13 years, 11 months ago)
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Harriett Baldwin (West Worcestershire) (Con)
3. What support his Department is giving to local authorities to minimise increases in council tax.
Charlie Elphicke (Dover) (Con)
8. What support his Department is giving to local authorities to minimise increases in council tax.
Independent Financial Advisers
Debate between Harriett Baldwin and Charlie Elphicke(14 years, 2 months ago)
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Harriett Baldwin
There are indeed advantages, and I thank the hon. Gentleman for his helpful intervention. He obviously has a lot of experience of dealing with the sector.
It is estimated that there are about 45,000 IFAs in the country, many of whom are sole traders.
Charlie Elphicke (Dover) (Con)
Should those tens of thousands of small traders not be encouraged to use their entrepreneurialism to help people save, rather than being squashed by the dead hand of unthinking regulation?