Income Tax

Debate between Jeremy Browne and Geraint Davies

Wednesday 5th November 2014 Commons Chamber

[Geraint Davies]

As the hon. Gentleman knows, being from south Wales I normally support miners, but I would say that he is very much an intellectual minor. [Interruption.] Yes he is. Yes—we all know where Lord Myners came from, God help us.

Focusing on the 50p tax rate, I have already made the case that income tax receipts are not going up owing to Government mismanagement—a low-wage economy with low skills and low productivity, and raising tax thresholds, which does not add up. It may be desirable to raise tax thresholds, but it does not add up and it is incompetent. Labour is talking about people making a marginal contribution at the 50p level.

[Mr Jeremy Browne]

Will the hon. Gentleman give way?

[Geraint Davies]

I will not just now. We have heard the hon. Gentleman muttering for a while, but I shall take an intervention in a moment.

Let us consider behavioural changes. The rate of tax went from 40p to 50p to 45p. The hon. Member for North West Leicestershire, being a business man, knows that if someone running a business who wants to minimise their tax liability faces that quick succession, they will move their finances. Instead of bearing down on the 50p rate, they will pay much more tax in the 40p year, and then the following year they will move their expenses from the previous year into that year at the 50p rate, so they do not pay that as tax, and then to the 45p rate. It is therefore no surprise that companies, like his own probably, made behavioural changes in a rational way to limit the amount of higher rate tax. But it does not follow that if the rate is kept forever at 50p rather than going up and down, they can play games and not pay that tax. Of course, there would be behavioural changes, and the Labour party’s assumption is not that instead of raising £3 billion, £100 million would be raised—that is one thirtieth, which is frankly ridiculous and preposterous; it is more likely to be well over a third. We appreciate that there may be some behavioural changes, but we are talking about taking billions of pounds from the richest people at a time when the Minister, who is sitting there pointing, is basically arguing that we should save £400 million—against, say, a £1 billion take from the richest—by taking money out of the mouths of some of the poorest children through the bedroom tax.

[Mr Browne]

On the higher rates of personal taxation, I would like to quote Tony Blair from 2001 when he was Prime Minister. He rejected higher tax rates for the rich in a “Newsnight” interview, saying:

“It is not a burning ambition for me to make sure that David Beckham earns less money.”

This is the only Labour leader who has won a working majority in the past 48 years. Why has Labour decided to abandon his wise approach and adopt an avaricious socialist approach instead, which has proved to be both a political and economic failure?

[Geraint Davies]

I do not want to say anything rude about David Beckham. Tony Blair was obviously a very successful Prime Minister, and as I have already pointed out, he increased the size of the British economy by 40%. If we were not sitting here after four years of the Tories borrowing more than Labour did in 13 years and with the debt going up and up, we would not have to think of measures to raise more money. It is because of the economic incompetence and failure of this Government that we need to raise more tax at this point.

I have pointed out that there are people who already pay marginal tax rates of 62p—national insurance plus income tax. They are doing that and they are not suddenly leaving the country. This is a sustainable tax that can be borne at this point in the economic calendar, and we need to do it to protect the very poorest. As I have already pointed out, we are ripping £400 million—incidentally, the area most affected by the bedroom tax is Wales, where 42% of council households face it—away from people who have virtually no money. It is simply unfair that those judgments are made.