Income Tax

Lord Bruce of Bennachie Excerpts

Wednesday 5th November 2014 Commons Chamber

[Chris Leslie]

The hon. Gentleman has done more for the very wealthy earning over £150,000. At this time of pressure on our public spending and on his constituents and mine, what did he decide to do? A typical millionaire, he gave away a benefit worth £100,000. He voted for that cut in the 50p rate of tax, which the vast majority of people feel is an obscene example of the unfairness of this Government. It is particularly a stain on the reputation of the Conservatives, but I want to hear how the Liberal Democrats justify their votes for the cut in that 50p rate.

[Sir Malcolm Bruce (Gordon) (LD)]

Apart from the fact that the top rate of tax was 40% for all but 39 days of the Labour Government’s time in office, will the hon. Gentleman tell us which Chancellor of the Exchequer cut capital gains tax to 18%, which this Government have now increased to 28%, and which Government capped the amount of tax relief for high earners on pensions? It was not his Government, but the present Government.

[Chris Leslie]

It sounds as though the right hon. Gentleman is trying to wriggle out of voting for that cut in the 50p rate. He tries to change the subject—“Look over here, we’ve done this” or “We’ve done that,” but he voted for a cut in the 50p rate for the very wealthiest in society. He asks—I am sure we will hear this from the Minister as well—why we did not do that for 13 years. We had a global financial crisis that hit tax receipts significantly, and in 2009, looking at the state of the public finances, we felt that the fairest thing to do was to raise the rate to 50p, which is obviously shocking to Government Members.

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[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—

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[Sir Malcolm Bruce (Gordon) (LD)]

The motion seems to me a distraction for a party that has no credible economic policy and wants to draw attention away from that fact. We, as Liberal Democrats, voted for the reduction from 50p to 45p, but on the conditions which we negotiated within the Government, that rich people would pay substantially more in taxes as a direct result. That is precisely what has happened. It ill behoves the Labour party to latch on to a headline figure when its analysis does not stand up. There has been talk about the low wage, low tax economy, but I happen to remember the first two years of the Blair Government, when sticking to Conservative party spending plans meant tens of thousands of experienced doctors, teachers, nurses and public sector workers were thrown out of work by the Labour Government and then had to be re-employed subsequently at much higher cost.

[Frank Dobson]

Will the right hon. Gentleman give way?

[Sir Malcolm Bruce]

No, I will not at this time, and I want to let other hon. Members in. That is what happened and I had the debate then.

The point I want to make is that the Labour party has never yet had the will to say sorry to the British people for what it bequeathed to us. The fact is that the economy collapsed by 7% in a single year. It has been a huge heavy lifting task for this Government to rebuild the economy to the point where we now have a strong and balanced recovery. My party’s objective is precisely to have a stronger economy and a fairer society. We believe we have made a very significant contribution to achieving that. In particular, I am slightly surprised at the disdainful way Labour Members treat the raising of the tax threshold, which has been hugely beneficial to many people on low earnings by taking them out of tax.

I have to say that I am astonished that the motion refers to the 10p tax, which has been nothing but a source of political embarrassment and division for the Labour party ever since it was thought up, invented and abolished by the Labour party. It is not clear to me whether Labour Members want to replace the 0p rate by a 10p rate, which of course means that what we are talking about is a tax increase, or whether they will follow the advice of the IFS, which says that raising the tax threshold is a much more efficient way of delivering benefits to poor people than a 10p rate. That is why we have supported raising the threshold and delivered it.

[Mr Jeremy Browne]

My right hon. Friend’s memory has momentarily failed him. The previous Labour Government did not abolish the 10p rate; they doubled the 10p rate. Everybody who was paying a marginal rate of tax at 10p started paying 20p. Some of the poorest people in my constituency and his were clobbered with a doubling of their tax rate under the previous Labour leader.

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[Sir Malcolm Bruce]

I am grateful for that. My hon. Friend is right. This is the point: to hear the pious tone of debate from a party whose incompetence in government and inconsistency was astronomical frankly takes my breath away. We have had to struggle to get the economy to where it is now, taking really difficult decisions for which we have certainly taken a political hit. I am not ashamed of the fact that we were prepared to do that to get a result that puts us in a better place than any other developed country in the current economic situation. I should also repeat the point that Labour cut capital gains tax to 18%. We have managed to raise it back to 28%.

The truth is that what we are seeing here is the end of new Labour and the re-emergence of old Labour. New Labour knew these policies would not work and would not make it electable. Old Labour has decided to try the old failed policies again. I suspect it will get the old failed result, which is that we do not need them. It is not the answer to the country’s problems.

The fact is that the highest earners are now paying more as a percentage of the total tax bill than they were. The figure increased from 22.7% of the total take to 24.2% between 2011 and 2013. We have not only introduced measures to increase the taxes on higher earners, but we have, for example, restricted their tax relief on pensions. Under the previous Government it was £250,000; it is now £40,000. In reality, a millionaire will pay £381,000 more tax on their income under this Government than they did under the Labour Government, so we are in fact building a fairer, more balanced tax system, best fitted to our needs.

I completely accept that we have not got the recovery to the place where we want it to be. Earnings are not growing as we would like them to, and it is absolutely true—I am not going to deny it—that many working poor people are still not getting the full benefits of economic recovery. However, they would be far worse off if we had not raised the tax threshold. As we move through the recovery, I hope we will start to get the productivity improvements that will ensure that real wages start to increase, and then those people will get even more benefit from the raised tax threshold than they do currently.

We have laid the foundations for what can become a sustained, fair and balanced recovery. The motion that Labour wants us to vote for today would take us backwards, not forwards. It would take us in a direction that historically has not worked and that would not work in the future. It is worth remembering that when the right hon. Member for Edinburgh South West (Mr Darling) introduced the 50p rate, he was quite clear that it was a temporary measure. I appreciate that people have said that he has qualified what he meant by that—although he is not here today, I notice—but in the circumstances it is worth pointing out that he said:

“I want to say a word about the 50p rate of tax, since I introduced it. At the time, I said it was a temporary measure. I did not particularly want to introduce it”.—[Official Report, 26 March 2012; Vol. 542, c. 1199.]

It was only introduced on the day that that Parliament was dissolved.

The history of the Labour party was one of giving huge tax concessions to the wealthy, whereas this Government, surprisingly enough, have reduced the 50p rate to 45p—which is still 5p higher than it ever was under most of the Labour Government—as well as imposing other tax restrictions and closing tax loopholes, many of which were opened by the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) when he was Chancellor of the Exchequer. We have also been much more rigorous in pursuing unpaid tax, with the Treasury estimating that £100 billion of unpaid tax will be recovered over the course of this Parliament as a result of measures taken by the present Government.

Labour Members should go back to their constituencies and prepare to explain why they got us into this mess and when they will find an economic policy that will legitimately get us out in a fair and balanced way, because that is what the Liberal Democrats have been doing. We get nothing but criticism from Labour, but absolutely no policies.