Finance (No. 3) Bill

Lord Field of Birkenhead Excerpts

Monday 4th July 2011 Commons Chamber

[Mr Hanson]

I have not yet heard what my right hon. Friend the Member for Birkenhead has to say about it, but the hon. Gentleman might be interested to know that we have discussions not just in the Chamber but outside it as party colleagues. My right hon. Friend will make his case in a moment, and I will listen to it and respond in due course. There are some issues that we need to consider, but it is not for me to respond to amendment 30; it is for the Exchequer Secretary to say why he has let down low-paid workers across the United Kingdom through his promises before the elections and his actions in the Budget. I look forward to hearing my right hon. Friend in short order.

My hon. Friend the Member for Hayes and Harlington has yet again tabled an amendment that has a great deal of merit. Although I do not expect it to be pushed to a vote, I want to hear what he says about it, because he has important points to make. The key point on all the amendments is that the Government need to provide clarity. We need clarity about what they are doing on the 50p tax rate and on low-paid workers, and on the points raised by my hon. Friend’s amendment. I look forward to hearing my hon. Friend, my right hon. Friend the Member for Birkenhead and the Exchequer Secretary in due course.

[Mr Frank Field (Birkenhead) (Lab)]

I shall not press amendment 30 to a Division tonight, because we will return to the subject in greater detail later in the Parliament. However, I want to address some questions to those on the Treasury Bench. I accept that there are problems with the amendment, but it was the only way that I could find to debate the matter in the House.

I wish to remind the Minister that in the Budget debate of 2010, the Chancellor said that

“the Government are asking the public sector to accept a two-year pay freeze, but we will protect the lowest paid…They will each receive a flat pay rise worth £250”—[Official Report, 22 June 2006; Vol. 512, c. 171.]

He said that the cut-off point would be not £18,000 but £21,000 a year, and he, not the Opposition, estimated that 1.7 million people would receive that pay increase.

A number of Opposition Members, including those who put their names to amendment 30, and many hon. Members, have constituents who believed what the Government said. They believed that they would be protected. The Chancellor’s announcement was a crucial part of protecting those workers, but it was also a crucial part of selling to the wider public the pay freeze that the Government announced. However, those people have so far received no £250 pay increase.

I should therefore like to ask the Minister two questions. First, of the 1.7 million whom not I, but the Chancellor, said would be eligible, how many have received the £250 across-the-board pay increase? Next year’s earnings figures show that the numbers eligible will rise to 2.2 million. Therefore, my second question for those on the Treasury Bench is this: how many of that 2.2 million will receive their £250 pay increase?

I conclude by merely trying to express, perhaps inadequately, a sense of how low-paid workers in my constituency feel. They feel that they have again been let down. The previous Labour Government did not do too well by that group, with the 10p tax rate abolition, and this Government have done not too well by them. Many are women coming up to retirement age who now learn that they must work two years more. They thought they would get £250 as a lump sum to protect them against rising prices and a general wage freeze, but many now find that no such increase is forthcoming. I would therefore be grateful if the Minister could give us answers to those two questions.

[John McDonnell]

May I associate myself with amendment 30, which I also signed? For my constituents, £250 means a lot. It is a lot of money in terms of paying daily bills, but it is also the difference between some children having a summer break this year and not. I hope the Minister responds positively and examines that matter, but I will give him this assurance: if we do not have positive assurances from the Government, we will be back time and again until that money is paid.

I wish to speak to amendment 14, which is in my name. The amendment simply proposes that, as we determine personal income tax rates for the coming year, we look carefully at their impact on inequality. The proposal is from various lobbies in recent months, from religious groups, churches, welfare rights groups, trade unions and other civil society organisations, which have expressed their anxiety about inequality in our society. Like them, I believe that our country is disfigured by inequality and the extremes of wealth and poverty. Consequently, I believe that we should use every legislative weapon possible to address it.

I mentioned some of the extremes of wealth and poverty in the earlier debate on executive pay—some top executives earn a salary that is 145 times the average salary of their workers. The Government’s assessment of wealth distribution last year showed that the total wealth of the top 10% of the population is now 100 times that of the bottom 10%. The simple reason is that the poorest have so little wealth.

In 1986 in the UK, the richest 1% held 25% of marketable wealth. Twenty years later, that had risen to 34% of total national wealth. The poorest 50% had gone from holding 11% of the nation’s wealth to holding just 1% today. That is not solely the result of economic trends or globalisation—it has been Government policy, largely in the 1980s and 1990s, to pursue the systematic redistribution of wealth from the poor to the rich, and the last Government at least held back the tide for a period.

Taxation policy has a key role to play in addressing inequality and I note that the Treasury Committee quoted Wendell Holmes’ popular dictum that tax is the price we pay for a civilised society. I agree, but civilisation has a range of definitions, one of which is that we should not live in a society that is so starkly unequal—

--- Later in debate ---

[Mr Gauke]

We will make further announcements as and when necessary, but we are publishing much more information on distributional analysis than any previous Government have. It is right to do so, and to take steps to ensure that the House and the whole country can debate such matters with as much information presented in future. A striking contrast can be drawn with regard to one policy—the doubling of the 10p rate—about which the hon. Gentleman and the right hon. Member for Birkenhead (Mr Field) had concerns. It was difficult to obtain any information on that policy’s impact, although we have learned in recent weeks that much of the information about that was available to Ministers at the time.

Amendment 30 seeks to provide a one-off £250 reduction in the tax liability of all public sector employees earning less than £21,000. In the June 2010 Budget, we announced a two-year pay freeze for public sector workers earning a full-time equivalent of £21,000. That is one of the many difficult choices that we have had to make to help put the UK’s public finances back on track, and it does not mean that we do not value the work done throughout the public sector. All Members know that those in the public sector work hard for the benefit of society. However, pay freezes of this sort save jobs. Given that we are having to constrain public spending and given that the fiscal deficit requires cuts, a pay freeze will help to mitigate the effect of those cuts. Because we recognise that the freeze will be hardest on the lowest-paid public sector workers, it was announced in the June Budget that those earning a full-time equivalent of £21,000 or less would receive an uplift of at least £250 in both years of the freeze.

Both the Labour party’s manifesto at the time of the last general election and the 2009 pre-Budget report announced a 1% increase for public sector workers across the board, apart from the armed services. No distinction was made between the low paid and the high paid. Under a Labour Government, none of those earning less than £21,000 a year—including nurses, teaching assistants, police community support officers and hospital porters—would be receiving a £250 increase.

[Mr Frank Field]

What we said at the last general election is not very relevant, because we lost. The other side won, and made a commitment in the Budget. The Chancellor stood at the Dispatch Box where the Minister is standing tonight, and said that 1.7 million low-paid workers in the public sector would receive an increase of £250. What we now want to know is how many are being paid the £250, and, if 1.7 million are not being paid that sum, what steps the Government will take to ensure that they are paid it.

[Mr Gauke]

The policy advocated by the Labour party when they were in government would have resulted in none of these public sector workers receiving £250.

We will ensure that the policy on pay increases for low-paid local government workers is applied across the civil service and to work forces with pay review bodies. That will include civil servants, NHS staff, teachers, members of the armed forces and those working in prisons. Many civil servants, nurses and prison officers, and the armed forces, have already received the £250 increase this year and can expect a further £250 increase next year, but other work forces have responsibility for negotiating their own pay deals. Decisions on the pay of local government work forces are for local government employers, rather than central Government, to negotiate. Provision was made in the local government settlement for local authorities to pay the £250 increase, but the fact remains that the decisions are made by local authorities. We gave them the opportunity to pursue the policy that we are pursuing at national level, but it is ultimately for them to decide how to pay their employees.

[Mr Field]

At the Dispatch Box, the Chancellor said that 1.7 million low-paid workers in the public sector would receive increases of £250 this year and next year. Will the Minister please tell the House how many of those 1.7 million have received the promised sum—promised by the Chancellor, not by me?

[Mr Gauke]

Where it is within the Chancellor’s control because the money is paid through central Government, those low-paid public sector workers will receive the £250. For those who work in local government, which is not within the control of central Government, we have provided local authorities with the funding to be able to meet that policy objective.

--- Later in debate ---

[Mr Gauke]

No. The funding settlement with local authorities was made on the basis that the money would be available for them to pay to low-paid public sector workers, but it is ultimately their decision.

Returning to the amendment of the right hon. Member for Birkenhead, I understand that it is intended to help enforce the Government’s policies, and I am sure he intends to be helpful. However, we do not believe that using the tax system is the right way to address this; we do not think that will be practical. It would add complexity to the tax system, and I therefore urge him to withdraw the amendment, especially as I know he will return to this subject at a later date.

[Mr Frank Field]

rose—