Finance (No. 4) Bill
Debate between Jacob Rees-Mogg and Owen Smith(13 years, 2 months ago)
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Jacob Rees-Mogg
Very simply, because £150 billion extra has not got to be borrowed. Forecasts of what may happen are fundamentally unreliable. In a large economy, no efforts to forecast a small percentage of growth that there may or may not be have been successful. In the history of economic forecasts both in this country and across the world, there is one thing of which we can always be certain: that they are wrong and that the outcome will be different. This extra £150 billion that is proposed is based on a theoretical level of growth that was never going to be achieved, and that was never able to be achieved.
Owen Smith
Does the hon. Gentleman therefore agree that it is equally uncertain that the revenue to be lost as a result of the change in the 50p rate will be just £100 million, as his Treasury colleagues contend?
Jacob Rees-Mogg
I am grateful to the hon. Gentleman for making that point, because I think the reduction from 50p to 45p will, in fact, raise revenue. I think the estimates are far too unambitious and that, actually, there will be an opportunity for the Government to go further in future. I am extremely encouraged that the Treasury is producing reports on what is the best level of higher rate tax.
On that point, the Government have yet again been right, brave and bold. It is, of course, marginally politically embarrassing in an age of austerity, when we are all in it together, to cut the higher rate of tax, but it is right to do so if that raises more tax for the country—it is right if that allows the Government to spend on the priorities that both they and the British people have. Yes, there may be unpleasant headlines and we may be mobbed up by the hon. Ladies and hon. Gentlemen on the Opposition Benches, but it was the right thing to do. Time will show that the 45p rate will end up raising more revenue, because rich people can leave the country and not pay tax, can decline drawing dividends from their companies and not pay tax, and can postpone taking revenue and not pay tax. It has been shown time and again that reducing rates results in higher rates of total income. The Government were right to introduce this measure, therefore.
Owen Smith (Pontypridd) (Lab)
What a pleasure it is to follow that barnstorming speech by my hon. Friend the Member for Bassetlaw (John Mann), which is one of many powerful speeches that we have heard from Opposition Members. There have also been some interesting speeches from Government Members, which I will come to in a moment.
People used to say that Budgets from Tory Chancellors, and Tory Chancellors themselves, were cruel but competent. After this Budget, they do not say that any longer. Opposition Members do not say it and nor do Government Members. We have heard quite a bit of criticism of the Budget, but little praise for it. Over the past few weeks, as the chicanery at the heart of the Chancellor’s Budget has been exposed, line by line, clause by clause, in the newspapers and in this House, the scales have fallen from the eyes of people across this country, and especially from the eyes of the people who were kidded into voting Conservative at the last election; from the eyes of the people who thought that the Chancellor was an astute political strategist and a smart steward for the economy; from the eyes of the people who thought that the NHS was safe in the hands of the Conservatives; from the eyes of the people who bought the balderdash about the big society; and from the eyes of voters in my constituency and constituencies like it across the country who heard that, apparently, we were all in it together.
That myth has been wholly debunked over the past couple of weeks, and in the speeches of my right hon. Friend the Member for Knowsley (Mr Howarth), my hon. Friends the Members for Dumfries and Galloway (Mr Brown), for Middlesbrough (Sir Stuart Bell), for Kingston upon Hull North (Diana Johnson) and for Llanelli (Nia Griffith), my right hon. Friend the Member for Stirling (Mrs McGuire), my hon. Friend the Member for Edinburgh East (Sheila Gilmore) and, of course, my hon. Friend the Member for Bassetlaw, we have heard it exposed once more today. They have exposed the black hole at the heart of the Bill where there ought to be measures for growth. The price for that black hole will be paid for by working people across this country. They have exposed the ludicrous, unthought-through, ill-judged measures, whether on pasties or caravans, that have been rightly and roundly mocked in the press.
Government Members have also made significant and challenging speeches. The hon. Member for Cities of London and Westminster (Mark Field), with his characteristic candour, pointed out the lack of growth measures in the Bill and bemoaned the fact that the Chancellor has not done more to deliver growth and to stop the economy flatlining. The hon. Member for Christchurch (Mr Chope) exposed the perversity at the heart of the changes in clause 8, which relate to child benefit. The hon. Member for York Outer (Julian Sturdy) gave a particularly good dissection of the madness of the pasty tax and the caravan tax. Those Government Members know that they no longer have a Chancellor whom they can trust to run the economy or to take charge of their party in the future, because in this Budget he presided over a slow-motion car crash.
With the tax on pasties, grannygate, the conservatory tax, VAT on caravans and the charity charge, this is not a Budget to boost growth or a Budget for any particular sector of our economy, except for the headline writers. They are the ones who have been waving their Order Papers and who continue to celebrate this Budget—the gift that keeps on giving.
Only this morning, we heard the Exchequer Secretary trying to justify the proposed changes on charitable giving and the 25% cap on tax relief. He did so by revealing that a handful of people in this country who earn more than £1 million and more than £10 million succeed in dodging paying their tax. There is no news in that. One would have thought that a competent Government who understood what they were doing would have realised that the flipside of that argument was to reveal that more than 75% of higher rate taxpayers—those paying 40% and 50%—do pay all of their taxes.
Members do not need to believe my words about that, or even examine the Treasury’s own analysis that reveals it. They simply need to read what the BBC’s economics editor Robert Peston said today. He pointed out that more than 73% of people earning more than £250,000 had been paying the 40p and 50p rates. Even among people earning between £5 million and £10 million, 70% or 80% paid the full rate. What does that mean? According to the economics editor of the BBC, it
“implies that many tens of thousands of people were (and are) paying the 50% tax rate, and were unable to dodge it. To state the bloomin’ obvious, all of those people were given a very lovely tax cut in the budget.”
It must surely have occurred to a competent Chancellor that he would be exposed by such analysis.
Owen Smith
I will in a moment, because the hon. Gentleman has some interesting perspectives on the value of the 50p rate.
One would have thought that a competent Chancellor, or perhaps some of his Ministers, would have spotted that if such data were put into the public domain, some of us might realise not only that the 50p rate garnered £1 billion in the last year, as has now been confirmed, but that it was going to bring us £3 billion to £4 billion a year steadily, not the £100 million figure that the Government are suggesting using smoke and mirrors.
Jacob Rees-Mogg
Even though the economics editor of the BBC says it, it does not necessarily mean it is so. The hon. Gentleman does not know what income people would have been able to draw but decided not to because it would be liable to the 50p rate. People with large incomes can decide not to take them. All that is known is that they paid the right rate on the income that they took.
Owen Smith
All that we know is what is written on page 52 of the review by Her Majesty’s Revenue and Customs of the 50p rate, in table A2. It states in black and white that £3 billion a year will be forgone as a result of the changes, not the £100 million figure that is arrived at with smoke and mirrors about the taxable income elasticity calculation that Treasury Ministers signed off. What does the Office for Budget Responsibility say about that? As the hon. Gentleman said, it says that there is huge uncertainty about that calculation. We contend that we should rely on the absolute numbers, as revealed this morning—that £1 billion was raised from the 50p rate last year, not the nonsense £100 million figure.
That situation reveals the priorities of the Government, who are taking £3 billion from pensioners. On average, £83 is being taken from them, and £285 is being taken from those turning 65 this year, to pay for a tax cut of an average of £40,000 for 14,000 millionaires. That is the Government’s priority. We cannot pretend to understand it, but it is unfortunately the priority that working people will pay for.
Finance Bill
Debate between Jacob Rees-Mogg and Owen Smith(14 years, 11 months ago)
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Jacob Rees-Mogg
The hon. Gentleman is absolutely right. That is why, as I was saying, it is right to address the problem now, when we are in a strong enough position to do it and take the pain. Nobody denies that cutting is painful. It is always difficult.
Having, I hope, established the seriousness of the situation, I want to move on to the balance between tax rises and spending cuts and why I think, once again, that Her Majesty’s Government have exactly the right balance. One figure has not been drawn out in these debates, but it is noteworthy. If we take net tax receipts and national insurance contributions as a percentage of GDP, we see that they will reach 36.4% in 2013-14. That level has not been achieved in any single year of socialist government from 1970-71 onwards. We are having the highest level of taxation as a percentage of GDP because of a Conservative Budget, of all things. Incidentally, the same figure was reached under the chancellorships of Lords Howe and Lawson. So the Conservatives are willing to tax when it is necessary to ensure the financial stability of the country.
Owen Smith
Given the manifest command of economic history that the hon. Gentleman is showing, will he answer a question that the Chief Secretary to the Treasury could not answer when I asked him earlier today? It was about growth. Can the hon. Gentleman name one five-year period during any of the past 40 years when we have seen the level of growth projected by the OBR—in particular, the level of job creation in the private sector?
Jacob Rees-Mogg
The hon. Gentleman asks the wrong question, for a very straightforward reason. I would happily ask a question back. Can he point to a deeper recession in the history of the United Kingdom? The fact is that recovery rates from very deep recessions are much faster than those from shallower recessions. That is the point that my right hon. Friend the Member for Wokingham (Mr Redwood) made earlier. We get very strong recoveries after a very serious downturn, and the seriousness of the recent downturn goes back to the 1930s, as the right hon. Member for Edinburgh South West (Mr Darling) so rightly pointed out.