Income Tax

Kate Green Excerpts

Wednesday 5th November 2014 Commons Chamber

[The Financial Secretary to the Treasury (Mr David Gauke)]

It is a rare privilege for a Treasury Minister to respond to an Opposition day debate on an economic matter this year. In the course of 2014, we had a debate on banking in January and a debate on the Office for Budget Responsibility in June, and now this. Why the reticence on the part of the shadow Treasury team? Imagine the scene in the shadow Cabinet room. With the general election fast approaching and Labour’s economic credibility at record lows, the pressure is on for the shadow Treasury team to make their big economic argument. So they all sit there, straining to come up with a topic for an Opposition day debate. They could set out their case on economic growth, but having spent years saying that our policies inevitably meant that the economy would flatline—remember the hand gestures—we are now projected to be the fastest-growing economy in the G7. They could talk about unemployment. Remember the predictions of another 1 million unemployed. But employment is at record levels, and unemployment, youth unemployment and long-term unemployment numbers are dropping like a stone. They could talk about the exciting plans a Labour Government might have to make our economy more competitive and dynamic, except that they have not got such plans, only plans to increase business taxes. What about the cost of living? The problem here is that hardly anyone believes that a Labour Government would make a positive difference to the cost of living, because we need policies for growth and jobs to deliver improvements in standards of living. They could talk about how Labour would deal with the deficit, except, presumably, everyone forgot to mention it in the meeting. “We must have something we can say,” someone says in desperation, and after a long and painful silence someone eventually says, “We could always trot out the 50p tax cut again. Yes, that will have to do.” So for the first tax and spend Opposition day debate of 2014, we return to a lazy and populist measure, which, as a former Labour Cabinet Minister has been reported to say today, is incidental to the state of the public finances.

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

A moment ago, the Minister commented on employment rates among young people, and across other groups too. Does it not trouble him and his colleagues that while employment rates are rising, in-work poverty is also rising, and the Government have no strategy to deal with this? What will he do about that?

[Mr Gauke]

The way to address that is by improving our productivity, by attracting additional business investment, and by ensuring that we are a good climate for businesses to invest in. That is how we get growth. It is through enterprise, not through punitive taxation that fails to deliver public finances to the Exchequer.

--- Later in debate ---

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

I hope to be very brief, Madam Deputy Speaker. I am grateful to you for calling me early in the debate. I apologise for the fact that I will have to leave for some of it, but I will be back for the winding-up speeches.

I want to make a few points on behalf of my constituents. I do not know the exact numbers, but I would guess that only a handful of my constituents are going to benefit from a tax cut on the basis that they earn £150,000 a year or more. In fact, it is quite possible that nobody in Stretford and Urmston stands to benefit. Therefore, my first question to the Minister is about the geographically distributional impact of this proposal. In this House, we talk repeatedly, and rightly, about our concern to rebalance our economy, our wealth and our resources around the country, but nowhere have I seen an analysis of where, physically, the beneficiaries of the cut in the 50p tax rate are. I would very much welcome seeing that information by constituency.

[Jenny Chapman (Darlington) (Lab)]

I am grateful to my hon. Friend for giving way, because she might save me the trouble of making my speech. Only 8% of taxpayers in the north-east of England pay the higher or additional rate of tax—I imagine that the situation is very similar in her part of the world—in comparison with the south, where about twice as many people pay the additional or higher rate.

[Kate Green]

I agree with my hon. Friend. Mine is not by any means one of the poorest constituencies in the country, yet we stand to benefit relatively little. I would therefore be grateful if the Minister said something about the geographical context.

[Andrew Bridgen]

The hon. Lady claims that her constituents are not benefiting from the cut in the top rate of tax from 50p to 45p. However, they are benefiting from the highest economic growth of any country in the G7 and from the 1.8 million new jobs created in this country—more than in the whole of the rest of Europe added together.

[Kate Green]

That brings me to my second point, which is about how this growth, and jobs growth, is affecting—allegedly benefiting—my constituents.

Ministers are very fond of asserting that work is the best route out of poverty and that the increase in jobs is therefore of benefit to working families. Of course, work ought to be the best route out of poverty, but the wage squeeze that we have seen in recent years means that that is simply not proving to be the case. When two thirds of children in poverty are living in households where someone is in paid employment, Ministers cannot be satisfied with a growth strategy that so misses the point in terms of rewarding those who aim to work and do the right thing. One of the reasons why those families are not benefiting from this jobs growth, apart from wage restraint, is that many of the in-work financial support measures that we put in place to support low wages—as indeed did earlier Conservative Governments, through family credit—have been eroded, frozen or cut under this Government. My second request to the Minister is for a more comprehensive answer than the one he gave a few moments ago to my question about what exactly is Ministers’ strategy for addressing in-work poverty, which is felt very acutely by many families in my constituency.

My third question for the Minister is one that I asked of Ministers at Treasury questions yesterday about the gender impact of a cut in the top rate of tax. As we know, men are disproportionately likely to benefit from cuts to income tax, particularly cuts to higher-rate taxes, and women are disproportionately affected by rises in consumption taxes because of their responsibility for managing the household budget. This has a direct feed-through to levels of child poverty. If women—[Interruption.] The hon. Member for Taunton Deane (Mr Browne) has clearly not looked at the many decades of social policy analysis in relation to this. If he has time later, I will take him through it. There is plenty of evidence that poor children have poor mothers. [Interruption.] If he thinks that this is sex discrimination, I am afraid that his analysis of the gender dimension of fiscal policy is even slighter than I understood it to be.

Yesterday I asked Ministers whether they could explain the gender analysis of their fiscal policy, which is exacerbated by things like their marriage tax breaks, the vast majority of which will benefit men, putting money in wallets, not purses. That will mean, again, that children lose out and child poverty is impacted.

[Sir Malcolm Bruce]

What about child care, free school meals and the pupil premium?

[Kate Green]

Free school meals have yet to be delivered, I should point out to the right hon. Gentleman. We see from this Government very generous promises, totally unfunded.

My final question for the Minister relates to inequality. Ministers are very fond of telling us that inequality is reducing—

[Mr Jeremy Browne]

There are more women in work.

[Kate Green]

More women in work on poor pay.

Ministers are very fond of telling us that inequality is reducing under this Government. It is true that there is a coalescing effect, with lower wages and middle wages meeting as middle-level earnings become stuck, but what is absolutely not in doubt is that the very richest continue to get richer and richer, with not only the top 1% but the top 0.1% seeing super soaraway growth. What measures are Ministers really taking to address the widening inequality between a very, very privileged sector at the top and those on middle and average incomes who are absolutely not feeling the benefit of their economic policies? The Government can look at measures on inequality that suit their arguments, but it is important that we have a wide range of measures and a wide range of strategies to address this rising incomes discrepancy.

Our proposal is one measure—a small one, I admit—to address and reverse some of the income inequality. It will not do all the heavy lifting, as my hon. Friend the Member for Nottingham East (Chris Leslie) said, but it will certainly be a step in the right direction.

Finally, increasing the tax threshold, as has happened under the present Government, is certainly one strategy for improving the incomes of relatively low-paid working families, but the benefits do not reach those on the very lowest pay who fall below the tax threshold. Of course, as the threshold rises the law of diminishing returns sets in. Meanwhile many of us—in fact, probably all of us—benefit from the continuing rise in the income tax threshold as more of our income is sheltered below the threshold.

I ask Ministers to come clean on the genuine progressivity of their fiscal policies. Those policies are not genuinely progressive, and they know it. Those policies fail to address in-work poverty or to tackle rising inequality in relation to wealth and income at the very top, and the Treasury seems to think that it is perfectly okay to overlook their distributional impact.