Joan Ruddock
Main Page: Joan Ruddock (Labour - Lewisham, Deptford)Department Debates - View all Joan Ruddock's debates with the HM Treasury
Amendment of the Law
Joan Ruddock Excerpts(12 years, 9 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Tyrie
I absolutely agree. My hon. Friend serves with me on the Treasury Committee, and we have published quite a detailed report on competition in retail banking that has won the support of Vickers and of the Joint Committee on the Draft Financial Services Bill, chaired by my right hon. Friend the Member for Hitchin and somewhere. [Interruption.] Harpenden, is it? My right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley)? Anyway, wherever it is, it is somewhere in Hertfordshire.
The loan guarantee scheme was at least announced. I have to tell the Chancellor, who is in his place, that several colleagues on both sides of the House have complained to me about the leaks and briefings in the days prior to the Budget. All I will say at this point is that the Treasury Committee will look at the matter.
The Committee will also publish a preliminary report on the Budget in time for the consideration of the Finance Bill. The timetable proposed by the Government is very tight, but we will do our best. In particular, we will scrutinise what the Chancellor has described—correctly, by the look of things—as a tax-reforming Budget. We will examine whether the main tax measures live up to what it is claimed they will achieve. We will assess them against a number of principles that the Committee believes should guide tax reform, which we set out in a report 14 months ago, “Principles of tax policy”.
Dame Joan Ruddock
I am most grateful. I hope that when the Committee does its review, it will consider the fact that for an ordinary family with two children, the losses coming this April will amount to £530 and the compensation that the Chancellor boasted of giving will amount to only £220.
Mr Tyrie
We will seek evidence on that point and on all the main measures, and we will publish it as quickly as we can. I thank the right hon. Lady for making that point.
The principles that we set out in our paper a little over a year ago were more or less endorsed by the Chancellor today. They were: does a measure make the tax system more simple, predictable—the Chancellor used that word—stable, fair and coherent, and does it unlock higher economic growth? As last year, we will ask the major accountancy bodies—the chartered accountants, the certified accountants and the Chartered Institute of Taxation—to score each major measure against those principles. We hope the Committee can thereby assist the House in gauging progress towards a simpler, fairer tax system. That is what all our constituents want.
We will also ask those bodies to scrutinise some of the measures that have been announced today—the cap on tax reliefs and its workability; the yield from the 45p rate; the general anti-avoidance provision, about which a number of us have concerns; and the reference to retrospection in the tax system that is associated with that provision, which many have held could damage the yield in the long run. We will also take a look at the Leader of the Opposition’s point that this was a Budget for millionaires, at the expense of the squeezed middle.
A number of colleagues have asked the Committee also to examine measures that were introduced in previous Budgets, to see what the effect of them has been. Have they had the effect of raising more revenue and generating more efficiency than was outlined for them when they were introduced? We have not made up our mind about which measures to examine in that respect, but I suspect that in a few years’ time the cut in the top rate of tax announced today will be a prime candidate. We will be able to judge whether Mr Laffer really was out and about.
Mr Redwood
We all know from the output and jobs figures that the economy did not do as well at the end of last year as it had done at other times since the Government were elected, but we also know that the forecasts are that growth will now pick up. I am sure the hon. Lady will welcome that and join me in having a serious debate on what this Parliament can do to make it more likely that my constituents and hers have jobs, and more likely that they are better-paid jobs.
The question whether real public spending is falling or not depends on the rate of inflation in the public sector, so I urge again that we take advantage of the tough times. There is a two-year pay freeze for public sector workers, and the Government say that they are buying things more cheaply throughout the public sector. In addition, there are recessionary conditions in Europe and other parts of the world. If we take advantage of those things, it should mean that we do not have to have big real cuts in spending, because we will have that £90 billion per annum to spend by the fifth year of the strategy.
However, we should focus today on taxation, which is clearly what the Leader of the Opposition wanted to focus on. I do not think he listened to the Budget speech or the numbers he was told, because my right hon. Friend the Chancellor made it very clear that he had come up with a series of targeted measures to tax the very rich more than if he had not made the changes. That is fine by me, and I would hope it is fine by the Labour party, but the Leader of the Opposition seemed to say that it was not fair, because some rich people would still get away with it. However, if we get enough or more out of them overall, is that not worth while? Surely even Labour would accept that if we raise rates too high, the very rich go away—they find ways around paying the tax or do not pay.
Labour in opposition does not take that seriously enough, but the former Chancellor and Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), took it very seriously when he was in office. As Chancellor, he had the option of putting the 40% rate up to 45% or 50%, or the 83% that Labour had when previously in office, but he never chose to do it. I wish he were here today. If he were, I would ask him, “Why not?” I think his answer to Labour groups around the country is, reportedly, that had he raised it above 40%, he would have raised less money in taxation rather than more. Naturally he wanted to get more out of the rich—on that I agree with him entirely—but the way to do that was to keep the rate at a sensible level.
The Opposition should study the figures for tax receipts. If they look in the new Red Book, they will see that self-assessment income tax is plunging this year. That is exactly the problem that my right hon. Friend the Chancellor has to tackle. Under Labour, self-assessment taxation at 40%—the then rate—brought in £22.5 billion at its best, before it made a mess of the economy. The forecast for 2010-11 out-turn is £22 billion, and the forecast for the 2011-12 out-turn—soon to be seen—is only £20 billion. That means that the Treasury now expects a 10% reduction in self-assessment income tax receipts, which is where many of the high earners congregate with their complicated tax affairs. Those, then, who think that a 50p rate raises a lot more money have a lot of explaining to do given that we are in the middle of this collapse.
Mr Redwood
I am sorry but I will not get any more time, so I am afraid I cannot.
If the Opposition study the Red Book, they will also see that when the 45p rate is firmly up and running, there will be a surge in revenues compared with the current bitter experience with 50p. Self-assessment income tax is scheduled to rise to £28.5 billion by the last year of this Parliament, showing that, according to the Treasury’s own model, growth is expected. However, I think we will see a much disrupted experience of tax collection now, because if we give advance warning of a new lower rate, we might have a problem in the year before, but we will have to see—we will watch with great interest.
Overall, however, the House should note that there are difficulties with getting the massive increase in taxation from the country which everyone wants. According to the current receipts table, there has been slippage every year in the current receipts forecast under national accounts taxes compared with the autumn statement. Some of that, of course, is the result of the policy change on lower tax designed to help people—we welcome that very much—but we have to understand that it is very difficult to get as much tax out of the economy as many MPs would seem to like.
The Government are right to want a Budget for aspiration; they are right to want a Budget that allows us to earn our way out of this situation; and they are right that we need to make it more worthwhile to work. I hope that they will reinforce that message in future Budgets. Since the 1970s, in which time we have had Labour Governments as well as Conservative and coalition Governments, no Government have ever been able to raise more than 38% of the total national income from taxes. I am sure that Labour would like to try it, but actually the record shows that Conservatives have taxed a bit more as a percentage of national income than Labour—normally because they have had to clear up the mess, the debts and the deficits that they have inherited.
There is a natural ceiling on how much we can get out of people in a free economy. When we have a footloose international economy, it is all too easy for the people with talent and money—Labour might not like them—to go somewhere else, spend their money somewhere else and invest in jobs somewhere else. We desperately need every job that we can get, and we desperately need the good will of those with money, talent, entrepreneurial flare and ability. We also need the money of some of those who do not have any of the above—we still want them here and to ensure that they spend their money here.
The Budget therefore has to concentrate on the crucial issues of how we reward aspiration and generate true prosperity. A much greater man than I, I think, said, “You cannot tax a country into prosperity.” This country is not short of taxes. Governments have been incredibly inventive in finding all sorts of ways of taking money off people. They are taxed again and again and again—on income, on spending, on savings, on capital gain. There are endless taxes. We are not short of taxes. We do not need new taxes. We need a growing economy and to persuade people to pay the taxes that we have put in place trying to pay for the public services.
We want great public services but we need to understand the language of priorities. I think those priorities are shared across the House. Both Labour and Conservative Members would choose to make health and education their top priorities for public spending. The last Government certainly did that with large sums of money, and this Government are doing it with what money they can find. However, I also hope we would agree—this is more difficult when Labour are in opposition—that we need reform of those public services so that every pound we spend is a pound well spent. We need to increase productivity and quality, and get more for our money, because everyone has to accept that times are hard and the amount of money available will be limited.
The Front-Bench team need to do all they said in the Budget to promote growth; they need to do more to sort out the banks because until we have properly functioning and competitive banks—super-charged to lend against good projects—we will not go as quickly as we would like; and they need to ensure that every pound they spend in the public service is well spent. That is the way to earn our way out of the crisis and into prosperity. We cannot tax our way into prosperity but we can earn our way there.
Stephen Williams (Bristol West) (LD)
All Budgets are packages, and all of them are balancing acts, and that is particularly true of a Budget presented by a Chancellor in a coalition Government. It is fairly clear for all to see, in bold primary colours, which are the yellow and which are the blue packages in this particular Budget. What is also clear is the string that binds together this Budget and this coalition Government: reducing our deficit from the position that we inherited, where £1 in every four was being borrowed; restoring our economy to balanced and sustainable growth; restoring and maintaining confidence in the international markets; and bringing about a fair tax system that rewards work and enterprise, and taxes wealth. Labour borrowed us all into the mess that we inherited in 2010, but under the coalition Government, Britain will earn its way back to prosperity.
As Liberal Democrats in the coalition, we wanted three tax changes in this Budget. First, we wanted a fair income tax system that would lift the low-paid out of tax and bring about a tax break for middle earners. Secondly, we wanted a system that would tax accumulated and unearned wealth fairly and effectively. Thirdly, we wanted action to tackle the abuse of the tax system that was taking place through aggressive tax avoidance schemes. All three of those objectives have been met by the Chancellor’s Budget.
Two years ago, we were all about to go out on to the streets to start the general election campaign. The Liberal Democrats’ No. 1 priority at the time was to achieve in this Parliament tax-free pay for all our fellow citizens earning less than £10,000. That objective is in the coalition agreement, and significant progress has already been made towards achieving it.
Dame Joan Ruddock
The hon. Gentleman is part of a Government who have voted to reduce the income of the average family with children by £530 from the beginning of next month. There is no measure in the Budget that will make up for that, and frankly, people in my constituency will see it as an insult to their intelligence.
Stephen Williams
The right hon. Lady will hear as I make progress through my speech that working families up and down the country, with or without children, will benefit significantly from the tax changes that the Government are making.
In the current tax year, we have raised the allowance from £6,475 to £7,475, lifting 800,000 people out of the income tax net altogether and providing a £200 tax cut for every basic rate taxpayer.