Finance (No. 4) Bill

Kate Green Excerpts

Thursday 19th April 2012 Commons Chamber

[Graham Evans]

Absolutely; I am most grateful to my hon. Friend for that contribution. At the end of the day, the Budget tells the world that this country is open for business because private sector investment and wealth creation through businesses such as those that my hon. Friend mentioned are critical to the success of the whole nation, not just young people and hard-working families, but pensioners.

Thanks to measures such as the clamp-down on tax loopholes, the very rich will pay more. There is an ideological divide: the Labour party wants the rich to pay symbolically higher rates of tax; the Budget ensures that the rich actually pay more tax. Her Majesty’s Revenue and Customs and the independent Office for Budget Responsibility agree that the 50% rate raises next to nothing. Indeed, having a higher income tax rate than communist China indirectly reduces tax revenues as it fundamentally undermines the competitiveness of the UK economy, discouraging inward investment and risking a brain drain of our brightest talent.

[Kate Green (Stretford and Urmston) (Lab)]

The hon. Gentleman’s comparison with communist China is completely spurious when we look at what remains of a western capitalist economy, but does he accept that it is widely agreed, including by the OBR, that the calculations on the amount raised by the reduction of the 50p rate to 45p are highly speculative?

[Graham Evans]

The hon. Lady makes a valuable point. I have huge respect for her and for everything she has done on child poverty, but if the 50% tax rate was so important to right hon. and hon. Members of the Opposition, why did the Labour Government introduce it only a month before a general election? Why did they not introduce it in 1997, 1998, 1999 or any of those 13 years? They left it until their last month.

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[Nigel Mills]

I certainly did say to my constituents that we would be a fair Government. I support fair tax measures. My hon. Friend the Member for Bristol West (Stephen Williams) quoted the IFS saying the granny tax was a

“a relatively modest tax increase on a group hitherto well sheltered from tax and benefit changes.”

While Opposition Members may not wish to believe the Government’s pronouncements, or even those of the Office for Budget Responsibility or the Office of Tax Simplification, perhaps they will believe those of the IFS.

We are not in a happy situation. I do not think any of us are happy about the types of Budget we are going to need to have throughout this Parliament and even perhaps most of the next one. There will have to be a series of measures on both taxation and spending that are going to hurt large parts of the population, while we try to tackle the deficit, which still amounted to £126 billion last year.

[Kate Green]

Something interesting and important was said a few moments ago: it is important that we design a system that encourages people to save and to look after themselves to a degree in retirement, and which rewards them for doing so. Does the hon. Gentleman agree that one of the problems with the granny tax is that people who have been able to make modest savings into small pension pots for their retirement, and who therefore perhaps now have an income of £12,000 or £13,000 a year, are seeing the effort they made to save completely wiped away? Is that not an injustice that is of particular concern if the Government want to incentivise saving for retirement?

[Nigel Mills]

I accept that that is an issue in respect of the granny tax proposal, but I suspect that the £5 billion tax raid which has been referred to and a whole series of other measures that have discouraged saving will have far more serious impacts. I am sure the hon. Lady would join me in welcoming the Government’s proposal to introduce the flat-rate individual state pension of, I think, £140 per individual, as that will help address the problem she mentioned.

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[Kate Green]

I congratulate the hon. Gentleman on his amendment and on his arguments in support of it. Does he agree that because of the failure to consult, we do not know the answer to the question of how this policy will play out between women and men? Currently, child benefit is paid to the mother as the maintainer of children, but she may now come under pressure from her partner to forgo that child benefit so that his tax bill is not affected. That means an injustice between women and men; and, more importantly, it affects the amount of money spent on children.

[Mr Chope]

The hon. Lady is absolutely right: that is another of the behavioural consequences, the full implications of which are not yet apparent.

One has to ask why we are going down this road. The justification for it—the avowed policy objective—is this:

“In order to address the fiscal deficit, the Government believes that it is right to ask those on higher incomes to contribute more.”

The Government’s proposal, however, asks those on higher incomes with families and children to contribute more, while those on higher incomes without children are not asked to contribute more. I do not see how that can be fair.

In case anyone thinks this is an issue discussed only among academics, let me say that it certainly goes very close to the heart of many of my constituents. I shall quote briefly from a letter that I received since the Budget from a constituent living in Christchurch. He starts off:

“I am writing to express my utter disgust and outrage at your party’s stance on child allowance announced in the budget last week.”

He explains that he and his wife choose to work hard, believing that they have a responsibility

“to look after ourselves and to help to generate wealth for the wider community”

by contributing their utmost to industry. He says that he has an income of £60,000 and that his wife earns £12,000, providing a combined income of £72,000. As he puts it:

“under your disgusting new Tax rules we will lose the child benefit for our two children. However, in a household with two working parents earning £40,000 each, combined income of significantly more…that family gets to keep their benefit.”

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[Kate Green]

Does my hon. Friend agree that if the Government do not even know that simple fact, they are even less likely to know how many people have incomes that vary and fluctuate between £50,000 and £60,000, and that that is going to introduce yet further complexity for those families in the course of the year?

[Cathy Jamieson]

Again, my hon. Friend makes an extremely important point, which I hope to discuss in relation to how the clawback will operate. Will the Minister commit to provide that breakdown by parliamentary constituency and make it available, as a matter of urgency, in the House of Commons Library?

It has appeared at various times during the debate that the announcement of the changes was designed more to appeal to the Tory party conference than as a plan to be actually implemented. Suggestions have been made that the Chancellor perhaps did not even believe that he would have to implement it. I do not know whether that is true, but this appears to be yet another part of what the Leader of the Opposition described as an “omnishambles”. In Scotland, we would say that the Government’s plan is a bit of a boorach, which translates as a mess or a muddle.

This boorach is, once again, entirely of the Government’s own making. On the clawback, those with incomes above £50,000 will have their child benefit withdrawn at 1% for each £100 of income from January 2013. There is to be no child benefit entitlement for families where any earner has an income of more than £60,000. Some of the changes being proposed might be small steps forward, but they do not change the fundamental unfairness. To return to the point made by my hon. Friend the Member for Birmingham, Selly Oak (Steve McCabe) about his constituent Mrs Morris, a couple with children where one earner is on £60,000 and another is on £10,000 will lose all their benefit, whereas a dual-earner couple on £50,000 each will potentially keep it all.

As the hon. Member for Christchurch (Mr Chope) said, the implementation of this approach will be complex. New computer systems and new staffing will be required. The Government have estimated costs of between £8 million and £13 million for the computer systems’ development and running costs alone, plus £100 million for staff resources. Interestingly, they have estimated that £5 million will be spent on customer information. I do not know exactly what customer information they intend to provide, but I hope that it will be explained in plain English. Over the years I have grown to mistrust Bills that have one-line clauses and multi-page schedules.

Schedule 1 is certainly not set out in customer-friendly wording. An MP sitting in an advice surgery trying to look through it to check out whether or not their constituents have an entitlement would have to go through seven pages. After several lines defining person “P”, person “Q” and whether or not “Q” is the partner of “P” throughout the week, they would find new section 681C, which provides an equation to work out whether someone would be entitled or not. That is not very customer friendly. There is a serious point as to whether the clawback mechanism is fair and workable.