Finance Bill

John McDonnell Excerpts

Tuesday 1st July 2014 Commons Chamber

[Mr Redwood]

That is simply not true. I am delighted to hear that the hon. Lady likes rich people—there are quite a few in her party, so let us hope she gets on well with them—but it is absolutely false to suggest that Conservatives have no interest in people who are out of tax altogether or who are on low incomes; we are desperately concerned that they should get better educational standards and have more opportunities so that they can get a job and then go on to get a better job. We wish them well, and we are very keen to work with all those in our constituencies so that they can take advantage of opportunities. We would like them to be on higher incomes. In the meantime, unlike the Government she supported, we have taken many more of those people out of tax altogether, because we think that those on an income of less than £10,000 a year should not have to pay tax. They will probably be receiving some benefit assistance.

Another point that the hon. Member for Birmingham, Ladywood did not respond to was the fact that the latest figures show that inequality rose under the Labour Government but has actually fallen a bit under the coalition, mainly because we have taken an awful lot of people at the lower end of the income scale out of tax. We have a very progressive system: the income tax system now exempts anybody on less than £10,000 and has a 47% rate, if we take national insurance as well on the highest incomes; and the benefit system rightly gives a lot of money to people at the low end of the scale and should not give any money to people at the top end.

[John McDonnell (Hayes and Harlington) (Lab)]

The right hon. Gentleman has made a number of assertions in his last few sentences. I wonder whether he has seen the report published this week by the Joseph Rowntree Foundation, which states that the cuts in child benefit and tax credits

“have typically created losses double the amount of tax allowance gain for working couples, and nearly four times the amount for working lone parents.”

I wonder whether he has seen the latest HMRC report, which states that the Gini coefficient started to rise significantly in 2012-13.

[Mr Redwood]

The figures I have been using refer to the whole coalition period and show a reduction in inequality, which I hope the hon. Gentleman will welcome. I do not recognise his figures on the child tax changes. The overall effect of taking a lot of people out of tax has been a very positive impact on their net incomes, as we would hope.

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[Mr Deputy Speaker (Mr Lindsay Hoyle)]

The Minister will respond just before 2.50 and we have four more speakers.

[John McDonnell]

I will be fairly brief.

Under the last Government, I moved amendments like the new clause on virtually every Finance Bill. It has always made me anxious when Governments resist the requirement to provide information. That is all that is sought in the new clause. It simply looks to ensure that the House is properly informed about the impact of a differential tax rate. For the life of me, I could not understand why such amendments were resisted by the last Government, and I cannot understand why the new clause is being resisted now.

[Richard Fuller (Bedford) (Con)]

On the point about being informed, does the hon. Gentleman think it unwise that the Leader of the Opposition has already stated that he will increase the rate to 50p?

[John McDonnell]

I want openness and transparency. I would prefer people to put their cards on the table in the run-up to the general election, so that the electorate know where everyone stands. It would be invaluable for all parties in the House to have the information that is requested in the new clause, so that they could test it and see whether the hypothesis that has been put forward by the right hon. Member for Wokingham (Mr Redwood) and others is accurate. I do not believe that it is.

This debate goes much wider than the 50p rate of income tax. Members need to wake up to that. A few months ago, the Mayor of London ordered water cannon in case there are more demonstrations and riots. There is a deep feeling of unease and a building anger in our community about inequality. People do not usually mobilise and go out on the streets in the depths of a recession. Let us look at what has happened elsewhere: people get angry, mobilise and go out on the streets when they feel that the country is coming out of recession, but they are not sharing in the benefits from the sacrifices that have been made. We have asked people in this country to make immense sacrifices.

We should look at the various reports that have come out. A few months ago the Oxfam report exposed the fact that for the first time more of the people who are in poverty are in work than out of work. More children are therefore growing up in poverty in working families than in non-working families. I think that that is a first in the history of this country. A survey by Save the Children showed that, as a result of poverty, a staggering number of parents are going without food so that their children can eat. It showed the number of children who have never had a winter coat because their parents are unable to afford one. All that is building up into a significant anger about the inequality in our society.

Taxation rates are therefore not just about the income that they raise; they are about tackling inequality. The right hon. Member for Wokingham said that this has been happening over a long period. We now live in a society that is more unequal than it has been since Victorian times. It is true that for a short period in this recession, the Gini coefficient went down for two years. However, according to HMRC figures, it started rising again in 2012-13. I think that that will provoke anger in our community. Politicians need to be aware of that anger. Unless we do something about it, it will be difficult to contain.

That is why Governments need to be seen to be addressing the appalling inequality in our society. One way of doing that is to redistribute wealth, as Governments ought to do. The new clause does not talk about the vast maldistribution of wealth in our society. One publication from the Treasury revealed:

“The top 10% of earners in Britain have salaries which are equal to more than the bottom 40% of earners”.

That is absolutely staggering, and that is just about earnings: in some FTSE 100 companies, the chief executive and the directors earn 166 times the average wage of the workers.

Taxation is about addressing inequality. The new clause simply looks at one element of taxation and asks for an accurate report on whether it helps in the redistribution of wealth and in tackling inequality.

[Richard Fuller]

The hon. Gentleman has expressed his concerns about rising inequality. Why does he think the Opposition have been so timid in proposing remedies? Are they afraid of something? Are they worried what the media might say?

[John McDonnell]

I will give the Labour party the benefit of the doubt. It has the national policy forum at the weekend, where there is the discussion and development of policy. That is the healthiest level of democracy we have had in the party for a number of years. I hope that it is bubbling up into a comprehensive programme that we can put before the electorate and that addresses the central issue of inequality. One way of doing that is to have accurate information before us, which is what the new clause seeks.

I will finish there because I know that other Members want to speak. I just warn the House that unless we address inequality, we will reap a whirlwind in our society. We saw riots only a few years ago. I think that the injustices in the distribution of wealth will provoke even greater conflict in our society unless it is addressed.

[Chi Onwurah]

I shall be brief. The new clause would force the Chancellor to publish a report that made it clear how the Government were balancing the books on the backs of the poor. [Interruption.] Ministers may laugh, but that is why they are afraid to make the information available. The benefits of rising prosperity and productivity are increasingly concentrated on a small group at the top.

At the same time, there is growing evidence that economic inequality is a drag on the economy. Business profits, literally, from being part of a better functioning and more equal society. Businesses can function only when people form a society that is structured around the principles of trust, responsibility and fairness.

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[Mr Gauke]

That is correct. It is a higher proportion than ever; it is more than was being received under Labour—

[John McDonnell]

Will the Minister give way?

[Mr Gauke]

I really should allow time for the hon. Member for Birmingham, Ladywood to speak. On this record, this Government can be proud.

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[Shabana Mahmood]

We have had a good debate on our new clause. As I expected, the tone of the Minister’s remarks suggests that he will not take the opportunity to support it, despite accepting the fact that the Institute for Fiscal Studies has joined us in saying that more research, data and analysis are necessary if we are to get a complete answer on the issues of data and yield relating to a 50p top rate of tax. I note that he did not answer my earlier question about that. If he wants to say to the country that his Government have cut the 50p rate with justification, he should not have shown himself to be afraid of such data. The Government should have agreed to the new clause, as its proposals would have settled the matter once and for all. I ask again, what does the Minister have to be afraid of? We will be pressing the new clause to a vote.

[John McDonnell]

Let us get the figures clear. On the percentage of gross income that goes on taxes, for the bottom quintile it is 37.4% and for the top quintile it is 35%. The poorest pay more.

[Shabana Mahmood]

I am glad that my hon. Friend has put that point on the record—