Oral Answers to Questions

Meg Hillier Excerpts

Tuesday 28th January 2014 Commons Chamber

[Mr Osborne]

The British business bank is lending to intermediaries that support non-bank lending to small firms. [Hon. Members: “How many?”] There was no British business bank before. The only bank that the Opposition helped to take into public ownership was the Royal Bank of Scotland, because they completely failed to regulate it.

[Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)]

One of the ways that the Treasury can help small businesses is by giving them a better chance of winning Government contracts. What is the Chancellor doing to use his Department’s clout across Whitehall to ensure that those contracts are not just snaffled up by the big guys?

[Mr Osborne]

That is a huge challenge for any Government and any bureaucracy, but I am pleased to report that under this Government, because we have focused all Departments on trying to increase their procurement from small firms, that has gone up from around 10% to around 20% of Government procurement. That is a big step forward, but I am the first to say that the job is not done. We want more procurement from small firms, not least because they are often the most innovative and entrepreneurial in the country.

Crowdfunding and the FCA

Meg Hillier Excerpts

Wednesday 18th December 2013 Westminster Hall

[Dr Julian Huppert (Cambridge) (LD)]

Thank you for calling me to speak, Mr Chope. I will try to be brief. I congratulate the hon. Member for Huddersfield (Mr Sheerman) on securing this important debate. I also pay tribute to my noble Friend Baroness Susan Kramer, who did a lot of work in this area before her elevation to a ministerial role, which has somewhat curtailed it.

The sector is huge; we can read about just how big it is in the excellent “The Rise of Future Finance: The UK Alternative Finance Benchmarking Report”. I am delighted that Cambridge was able to play a part in that; £939 million is a large sum of money. The sector is also incredibly varied. In my constituency, for example, SyndicateRoom is doing equity crowdfunding, and the Future Business Centre is using social impact bonds to build an entire building for social enterprises. RealVNC, a software company, was set up though merchandising; it sold products with its logo on to get the money to build a better product. There is also Frontier Developments and its game, “Elite: Dangerous”. Those are all crowdfunded. The area is so varied that there is a huge challenge for regulation.

The sector must be regulated to avoid problems—none of us wants to hear the story of the granny who loses all her savings on something like that—but we must ensure that the regulation is not disproportionate. We must ensure that we have principles regulation, not firm tracks that lock everyone down and kill off the excitement, as the hon. Member for Huddersfield said. That is my aim.

The Government are supportive; I will finish with a quote from my right hon. Friend the Secretary of State for Business, Innovation and Skills in response to the excellent benchmarking report, “The Rise of Future Finance”:

“Alternative finance is playing an increasingly important role in helping businesses access the finance they need to grow and contribute to the economy.”

Let us ensure that that can continue.

[Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)]

rose—

[Mr Christopher Chope (in the Chair)]

I shall call the Minister now. If the hon. Lady wishes to intervene, it will be up to the Minister.

[The Financial Secretary to the Treasury (Sajid Javid)]

Welcome to the Chair, Mr Chope. I, too, congratulate the hon. Member for Huddersfield (Mr Sheerman) on securing this debate, and on the important work that he does as chair of the Westminster crowdfunding forum. I share his enthusiasm for crowdfunding and the peer-to-peer alternative funding platforms that he mentioned. I cannot think of a single thing he said that I disagree with; it is quite rare for me to say that to him. I say that not in a spirit of good will because it is close to Christmas, but because I thought he talked a lot of common sense. Clearly, he knows a lot about the issue, and I hope that he stays involved in it for a long time to come—it sounds like he will—because I think he can add great value to this area.

Small and medium-sized enterprises are a vital part of the UK economy and contribute significantly to economic growth, as we have just heard. In particular, access to finance is important to ensure that businesses reach their full potential. At times when there are greater constraints on credit, alternative finance markets, including crowdfunding, become even more crucial. That is why crowdfunding, though it may be a relatively new industry, is growing quickly.

[Meg Hillier]

May I draw the Minister’s attention to a donation-based crowdfunded organisation called Turning Earth in my constituency? It raised more than £13,000 through Crowdfunder and sells work spaces and classes in pottery. It says that, critically, the money levers in other money, because there is confidence in the community that the organisation will work. Does that not do something to tackle the asymmetry of banks, which are frankly letting down small businesses, and the challenge of funding small businesses?

[Sajid Javid]

The hon. Lady is right. There are examples of banks letting down small businesses. That shows the power of crowdfunding. I had not heard of Turning Earth before, but I am glad that she has brought it to my attention. I will take more interest in it now. If I heard her correctly, she mentioned that it has already raised £13 million—[Interruption.] Oh, £13,000. Well, that is an excellent start. There is great growth potential in that number.

Over the past two years, in total, more than £700 million has been lent through peer-to-peer platforms. There has been a 600% increase in equity platforms between 2012 and 2013, raising approximately £28 million this year. There has been significant growth in debt-based security platforms of more than 370% in a year, raising almost £26 million over the past three years.

The crowdfunding market has huge potential to expand much further, and the UK has a strong global position in crowdfunding investment. Like the hon. Member for Huddersfield, I am keen to ensure that we maintain and grow that position. As such, the Government have taken a number of steps to support this burgeoning industry. We have invested £30 million in peer-to-peer platforms through the business finance partnership: £20 million has been provided to Funding Circle, which facilitates loans to small businesses, and £10 million has been provided to Zopa, which has facilitated £432 million of lending since its launch in 2005.

Our generous tax reliefs, granted through the seed enterprise investment scheme, are widely used by equity platforms. Some platforms have reported that 80% of investors are using that scheme, which provides an important incentive for investors to invest in smaller, perhaps riskier businesses, allowing them to grow.

[Meg Hillier]

One of the FCA’s considerations is separating the sector into debt crowdfunding and equity crowdfunding. I represent Seedrs, which is based in Shoreditch and does a great deal of good work in this area. The sector is very diverse, so will the Minister comment on whether the Government desire to keep that diversity while ensuring that there is regulation, without making false divides and pigeonholing the diverse crowdfunding industry into the categories of debt, equity or, indeed, donations? Donations are not within the FCA’s remit at the moment.

[Sajid Javid]

I thank the hon. Lady for her intervention. I am just about to address regulation; that might help to answer her question. This is also a good opportunity to pay credit to Shoreditch as an area that is heavily involved in crowdfunding. It is a growing space, and I would like to see it continue to grow.

We listened to the peer-to-peer side of the industry when it asked about regulation. We are working with the FCA to regulate that side of the industry and develop a proportionate framework. The framework has been well received by the peer-to-peer industry. Although the equity and debt security side of the crowdfunding market is already captured by some regulation, it is keen for a more tailored framework. The platforms’ view is that regulation provides them with credibility and helps to attract investors. They actively lobbied the FCA for inclusion in the consultation, and we supported them to achieve that goal.

Although we recognise the importance of regulation for the industry at the request of the platforms, it is essential that regulation be proportionate, as all hon. Members have said, if we are to ensure that it does not stifle the market’s growth. The Government therefore continue to work with the platforms and the FCA to ensure that the optimum framework is implemented—a framework that satisfies the industry, provides increased certainty to investors, and enables the crowdfunding industry to continue on its upward trajectory.

Before I close, I would like to say that having proportionate regulation is also key to ensuring that there are no unnecessary barriers to entering the industry. One of the industry’s successes over the past few years has been the very light barriers to entry. The Government and the regulator are keen to ensure that we have regulation that is proportionate enough to achieve the objective of protecting consumers, both borrowers and lenders, without creating barriers to entry that make the industry grow at a slower pace or stifle growth.

[Meg Hillier]

I welcome the Minister’s comments, because some years ago I called for regulation, but not to such an extent that it might put people off. Perhaps he can write to us if he does not have this information. NANA in my constituency is a café run by older women that was funded through donations on Kickstarter. Nana is located in former toilets on Chatsworth road in Homerton, and people fund it by buying a tea towel or donating a cheque. At the moment, the FCA is not considering the regulation of that sector. Does the Minister have any information on whether regulation of the donation sector will at any point be considered by the FCA or the Government?

[Sajid Javid]

As the hon. Lady kindly suggests, I will write to her and take a closer look at what plans the FCA does or does not have.

Oral Answers to Questions

Meg Hillier Excerpts

Tuesday 14th May 2013 Commons Chamber

[Danny Alexander]

My hon. Friend rightly draws attention to the figure of £28 billion—the extra borrowing in the alternative Queen’s Speech put forward by the Opposition. It confirms yet again that their approach is to borrow more and more, taking no account of the consequences. Perhaps that is one reason why the Leader of the Opposition, in a well-known radio interview, refused to accept that his party would increase borrowing and why his proposals have rightly been dubbed a “Milishambles”.

[Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)]

Research by the House of Commons Library shows that no peacetime Government since the 1920s have presided over fewer housing completions than this Government over the past two years. When will the Chancellor and his team stop tinkering with allowing a few people to buy new homes, and instead deal with the systemic problems by increasing housing supply?

[Danny Alexander]

The hon. Lady should study the figures more carefully. They show that the low points in housing starts and housing provision were in 2009 and 2010 respectively—both years in which her party was in office.

Oral Answers to Questions

Meg Hillier Excerpts

Tuesday 29th January 2013 Commons Chamber

[Sajid Javid]

That is a shocking reminder of the economic incompetence of the previous Government and of the damage that they did to our economic base. The revitalisation of manufacturing is important for the rebalancing of our economy. Keighley in west Yorkshire has an important manufacturing tradition, and it is benefiting from the manufacturing advisory service and from the £2.7 billion of regional growth money that is going to the entire nation. Also, the announcement in the autumn statement of more money for UKTI will benefit the help that UKTI gives in Yorkshire.

[Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)]

T3. Today, we saw the Government unveil their “pile ’em high, teach ’em cheap” approach to child care, hot on the heels of cuts to tax credits for poor working families and cuts to child benefit. When is the Chancellor going to unveil his supposed plans for a tax benefit for child care? What are the Government doing to support working families?

Oral Answers to Questions

Meg Hillier Excerpts

Tuesday 11th December 2012 Commons Chamber

[Danny Alexander]

Yes, I do agree. The fact that the job outcomes are more stretching than previous schemes before providers get paid and that they are paid only for results—not just for activity—of course means that it is harder for them to start with, but the fact that there have been 200,000 job entries under the scheme up to September 2012 speaks for itself.

[Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)]

8. What recent assessment he has made of the effect of the Government’s fiscal policies on the level of long-term youth unemployment.

[The Financial Secretary to the Treasury (Greg Clark)]

I have made a recent assessment of the impact of fiscal policies on youth unemployment rates. With few exceptions, European countries with the highest deficits also tend to be the countries with the highest youth unemployment rates. In this country, a big increase in the deficit under the previous Government went hand in hand with a big increase in the rate of youth unemployment. Under this Government, the deficit is now coming down, and so is youth unemployment—including, as the hon. Lady knows, in her own constituency.

[Meg Hillier]

Overall in my constituency, the number of claimants on jobseeker’s allowance in October was the 22nd highest of all constituencies. Among 18 to 24-year-olds, the rate was 10.4%. That is far too high. My constituency has regular visits from the occupants of No. 10 and No. 11 Downing street to extol the virtues of Tech City, but what is the Treasury doing to make sure that my constituents are able to get any of the jobs created, especially when the Work programme is also failing them?

[Greg Clark]

The hon. Lady was a Minister in the last Government, and she will know that in her own constituency there are fewer young unemployed people now than there were in the last year of the Government of whom she was a member. I am surprised that she has not taken the opportunity to refer to the fact that the rate of youth unemployment in Hackney South and Shoreditch has fallen by 20% over the last 12 months.

Oral Answers to Questions

Meg Hillier Excerpts

Tuesday 6th November 2012 Commons Chamber

[Danny Alexander]

I have not had a chance to study that report, but, in the light of my hon. Friend’s question, I certainly will. He will know that the new national planning policy framework specifically encourages self-build, and many of the planning system reforms the coalition Government have pushed through will help self-builders to achieve their aspirations.

[Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)]

The Chief Secretary spoke about the bidding for affordable housing, but the well has now run dry. Housing associations in my area have no more money to spend on affordable housing, and the birth rate in my area is increasing. What will the Chief Secretary do to ensure that in future people in Hackney and around the country have affordable homes to live in?

[Danny Alexander]

I want to see more affordable homes built. That is why this Government are the first Government to put in place Government guarantees for housing associations; that was never done by our predecessors. The Infrastructure (Financial Assistance) Act 2012, which received Royal Assent last week, will enable housing associations to benefit from £10 billion of Government guarantees, lowering their cost of finance and enabling them to build more homes. That has been widely welcomed in the housing association sector, including by the National Housing Federation. I think the hon. Lady should welcome it, too.

VAT on Air Ambulance Fuel Payments

Meg Hillier Excerpts

Wednesday 11th July 2012 Commons Chamber

[Mark Pawsey (Rugby) (Con)]

I join colleagues in congratulating my hon. Friend the Member for Hexham (Guy Opperman) and the hon. Member for York Central (Hugh Bayley) on securing this debate. I contribute to it as the chairman of the new all-party group on the emergency services. We recently secured a Westminster Hall debate on the interoperability between the emergency services, including the role of the air ambulance, at which my hon. Friend spoke eloquently about his support for the air ambulance, on the basis of the motion before us. I wholeheartedly agree with the sentiments expressed by hon. Members and join them in putting on the record my support and thanks for the service that air ambulances provide up and down our country. They supply a crucial and critical service for which we should all be thankful.

Many hon. Members have given accounts of people who support the air ambulance service, and a friend of mine, Gill, was involved in a major road accident on a country lane. She suffered multiple breakages and was airlifted by the air ambulance to the local trauma centre and treated. Having been helped by our air ambulance, she, along with many others in the same position, is an effective and enthusiastic fundraiser for our local air ambulance. She trains as a volunteer, runs stalls, sells Christmas cards and collected funds at a rugby game played on “The Close” at Rugby school. This is a key feature of the air ambulance service: it is funded through donations and with the support of the community. That unique funding method not only encourages local people, but means savings to government.

Although I support the call for a Government review into VAT, I wish to raise one or two concerns about it, as I believe the House should hear them. I do this because of the approach taken by the air ambulance service, whose Warwickshire and Northamptonshire service covers my constituency. It argues that charities, such as air ambulances, should be working closely together and with the Government to make efficiencies within their organisations, and I have one or two suggestions as to how that can be done. In asking for caution, my case is based on the voluntary funding of the air ambulance service, depending, as it does, on the unique feature of donations from local and national companies. That key feature enthuses people to get involved because they know that currently the air ambulance service receives no Government or lottery funding. Most importantly, the Warwickshire service does not seek Government or lottery funding. In fact, it strongly argues that its independence from Government is what enables it to innovate and drive up service delivery standards.

[Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)]

The London Air Ambulance is based at the Royal London hospital, which is just outside my constituency, in the constituency of my hon. Friend the Member for Bethnal Green and Bow (Rushanara Ali). People with serious trauma who are taken by air ambulance to the Royal London are much more likely to survive than those who are not. That underlines the point about the quality of service that this charitable money is delivering.

[Mark Pawsey]

That serves to highlight the unique nature of the air ambulance organisations.

On the payment of VAT, or any other tax, let me quote from a representation from Warwickshire and Northamptonshire Air Ambulance:

“Along with the rest of the world, we would welcome any reduction in taxation levels and in an ideal scenario we would pay no VAT on any aspect of our service.”

That is right, of course. In an ideal scenario—when we are enjoying periods of sustained economic growth and there is no pressure on Government finances—many different kinds of concessions can be made, but unfortunately this Government have been left with a structural deficit, so they may not be able to fund all the items of expenditure that we might want. The air ambulance service made this point to me:

“In the current fiscal climate we believe that charities and organisations like ourselves whose sole aim is to benefit our communities, should not seek further strains on the public purse.”

There is a contrary view, therefore, and it is held by the air ambulance service based in my constituency.

Finance Bill

Meg Hillier Excerpts

Monday 2nd July 2012 Commons Chamber

[Nigel Mills]

I am sure that people who benefit from a tax cut will be pleased and those who lose out from a tax change will not be, so I guess I can agree with most of that, but it will be interesting to see in the Lobby later whether the hon. Gentleman votes for his party’s amendment, which would mean the House passing the Bill after abolishing the 45p rate completely and reducing it to a 40p rate.

It is all right saying, “Perhaps we can do that and perhaps the Government will do something different in future,” but we are legislating in Parliament, and if we were to vote for the amendment and remove the 45p rate, it would not actually exist, and I am not sure that those Members who would rather the provision read “50p” than “45p” could in all conscience vote for that. I clearly will not vote for the amendment, because it would be the wrong measure at this time; I will vote for there to be a 45p rate in next year’s tax regime.

When I debate these things, I could take a narrow constituency view. I suspect that very few of my constituents pay the 50p tax rate, as I have many pensioners who are not that well-off and will be adversely impacted by the granny tax, so from a political and personal view I could happily oppose the tax cut and the granny tax, too, but we have to get our economy into sensible working order.

[Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)]

The hon. Gentleman talks about the over-65s, saying that this is all very fair and things will balance out over time. Does he not understand that someone over 65 is likely to be on a fixed income and £323 is therefore considerably more important, whereas if someone earns higher amounts and is taxed at 50%, 45%, 40% or anything in between, whatever it may be, they have the capacity to earn more? Once they retire, it is the fixed nature of their income that makes the Chancellor’s decision so invidious.

[Nigel Mills]

I am grateful for the intervention, and of course understand that pensioners living off their savings have suffered terribly during the recession, starting with the raid on private pensions when Labour first came into office, all the way through to the terrible impact of the loss of interest income on savings. I totally accept that that is clearly an issue, but to return to the 45p or 50p rates we ought to be completely accurate. With the 2p national insurance charge, which comes in when someone normally starts paying NI, and which will remain, those rates are 52p or 47p. We should be careful on a matter of principle. I am not sure how many people out there would want to work if the money for more than half an hour of every hour that they worked was not for them but for the taxman. That is what that effective 52p rate does; it means that a person is probably not working for themselves for 31 minutes of every hour.

I am not sure that that is a real incentive for those who have a lot of money. They do not need to carry on working; they could retire to their yachts and sail around the Mediterranean. We want them to come back, invest in another business, have another go and employ some more people. We want that investment to come into the country. If a person is keeping less than half the money they earn, there is a real psychological impact. That is why it is right to bring the rate down.

We are having a long political debate about what was meant to be a temporary tax. The previous Government never had it in place when they were in power; it was set up as a political stunt for the election. It was not expected to raise significant amounts of money. It was there not for an economic purpose, but a political one. It was right for us to say that at a time when we need to get activity going and to attract investment into the country, we need to encourage those who have a choice whether they carry on working and generating wealth or not, to carry on working.

It is right for us to bring the tax rate down. I would have thought that it was better just to do it rather than wait a year, but there are many good economic reasons why we had to wait for that length of time. The fact is that if tax rates are too high, people get much more keen on avoiding tax.

When I was relatively new in my accountancy career, the then Chancellor in effect reduced the capital gains tax rate to 10% tax on the sale of a business asset. The place where I worked then had made lots of money advising people on how to reduce their capital gains tax liabilities when they retired from their businesses. When the rate went down at a stroke overnight from 40% to 10%, that meant that no one was interested in that kind of tax planning; they were perfectly happy to pay what they thought was a reasonable tax bill. But the reverse effect also applies—if the rates go up to a level that people are not happy to pay, they will start to use ingenious methods to avoid the taxes.

[Nigel Mills]

I guess it is not for me to explain the right hon. Gentleman’s comments. He was clearly misinformed.

However, we have seen that drift towards tax avoidance. I was saying that there was an easy way to avoid paying UK tax—not to be working in the UK at all. People can choose whether to come here or stay here; no complicated avoidance is necessary if they are not here at all. We want to attract the most skilled and able here to earn their money.

My hon. Friend the Member for Dover (Charlie Elphicke) was generous in not having a go at some of the high-profile individuals who have been caught avoiding their taxes. People earning very good livings in this country should pay the tax that Parliament tells them they have to pay—there is no excuse for using complicated routes through Isle of Man or Channel Islands trusts. If they are taking money from hard-working people who go to their concerts, comedy shows or football matches, it is outrageous for them to route it through the Isle of Man. I am not sure that I would choose to listen to their concerts or their jokes.

We should send a strong message that such behaviour is unacceptable. If those people are now feeling a little guilty and think that they have made a terrible error of judgment, it is quite simple—they can re-file their tax returns from recent years, declare all that income and pay tax on it. As Gary Barlow might think, “It only takes a minute” to do that—[Interruption.] We had to get some in. Then that money would be “Back for good”, wouldn’t it? It would certainly be one of our “Greatest day”s. I only “Pray” that he would do that—it would certainly be magic if he did. Those are all the Take That songs that I can remember, so I will not carry on.

The important point is that if we push tax rates up too high, revenues will start to go down and people will start engaging in the behaviour we want to crack down on. The Government are cracking down on it and doing everything they can, but there is a limit to how far ahead they can stay. New things will always come along. Fundamentally, we cannot stop people leaving the country.

Labour Members generally think that Conservative Members cite the Laffer curve; we have heard mention of calculations on fag packets and so on. The theory that revenue falls if tax rates are too high is a lot older than the Laffer curve. I had the pleasure of studying Mr Ibn Khaldun, a Muslim philosopher from the 14th century, who wrote an extensive commentary on what happens with tax rates. When they start low, they generate lots of economic activity. Gradually the Government like the idea of spending money, taxes go up and then the economy fails. If our debate was not programmed tonight, I could read out pages of those quotes, to prove that Mr Laffer’s theories are not new, but I shall resist. The theory is not new; it is an entirely understandable and accurate theory: if tax rates are too high, we end up losing revenue.

Another amendment under discussion would give a £250 tax cut to a public sector worker who had not had their £250 pay rise for the last two years. I am not convinced by that. It would be very generous; presumably, if they had had the pay rise, they would have to have paid tax on it, so they would not have had the full benefit of the £250. The idea is probably tempting, but I will not be able to vote for it.

[Meg Hillier]

I do not want to broaden the debate too much, but I say at the outset that we should get back to the basics. Why is it important that people pay tax? I strongly believe that it is important for people to have a stake in society and that paying tax is a big part of that. I may be out of step with a number of Members—including, possibly, my party’s Front Benchers—in believing that the rush to increase the personal allowance and take lots of people out of tax is not necessarily, on its own, a good move. Taking people out of the tax system altogether denies them responsibility for a number of issues to do with public spending and takes away the accountability that we, as elected Members, should have in helping to set those policies.

[Nigel Mills]

I agree with the hon. Lady, but does she note that we are not taking people out of national insurance? All those people are still paying the tax most closely associated with the main public spending items.

[Meg Hillier]

It is interesting that the hon. Gentleman has managed to conflate tax and national insurance; perhaps he has given away what the Government’s thinking really is.

I am a member of the Public Accounts Committee which has been looking closely at the sometimes interesting tax arrangements of some individuals. We recently went on a study visit and discussed some of the international issues to do with how tax is dealt with. The UK’s is a complicated system and we are not alone in that. This means that, in the corporate world, corporate lawyers can run rings around HMRC and that highly paid lawyers can find ways for some high-worth individuals to work in a more tax-efficient way, to put it politely, and actively to avoid tax—sometimes worse. To a degree, New Zealand has simplified its tax system, although it is difficult to know from a distance how successful that is for people.

If the increase in allowance were genuinely linked to a simplification of the system, I would be much more supportive of it, but it has the feeling of being rather piecemeal, a bit joined together. It is like a dodgy second-hand car—the front bit is welded to the back bit. The coalition feels a bit like that; sometimes I am not entirely sure whether the Deputy Prime Minister or the Prime Minister is at the front or back at any particular time. There is a danger that we are seeing the increase in the personal allowance as a sticking plaster for one element of the coalition, while the cut in the 50p tax rate, which, as my hon. Friend the Member for Ashfield (Gloria De Piero) pointed out, was opposed by the Liberal Democrat half of the coalition—she quoted the former Energy Secretary—is a sop to the other side. We almost have two unjoined-up bits of the system.The hon. Member for Amber Valley (Nigel Mills) talked about tax simplification. If that is the mission, then let us see the overall plan for it, but all we hear about is the increase in personal allowances. I do not sense that there is a big idea, and that is a real worry.

Let me turn to the 50p tax rate cut. Some 300,000 taxpayers will gain £10,000 a year as a result of that policy. These are individuals who earn more than £150,000 a year. The Treasury says that it should do this because £2.9 billion will supposedly come back from the people who are currently avoiding tax. I am not sure that that stacks up. Government Members try to suggest that these earners are all wealth creators, but we need to look a bit closer to home in the public sector. Perhaps the Government of whom I was a part, and the party that I represent, should have been a bit sharper in this regard. Public sector salaries have increased exponentially over the past decade. With the best will in the world, and much as I admire many of the people in my own constituency, and those I have met over the years, who work in the public sector because they genuinely believe in public service, they are not wealth creators, and I do not think they would consider themselves to be so. They may be safeguarding the health of my constituents or enabling the council to deliver excellent services; there are myriad ways that they can help, but wealth creation is not one of them.

--- Later in debate ---

[Ian Lavery]

I totally agree with my hon. Friend. Ten thousand pounds a year equates to £833 a month, and it is more than hundreds of thousands of people in my constituency make on an annual basis.

[Meg Hillier]

Absolutely. If we have a duty in this House, it is constantly to remind ourselves of what life is like for our constituents. We can get lulled into a sense of safety and snugness on these green Benches and enjoy intellectual repartee and debate, but we are here to represent the people who elected us. It is incumbent on us to remember that many people are living on £10,000 a year or less, and it is important that we reflect their concerns in this House. For me, that is a burning issue. I want my constituents to earn more than £10,000 a year, but they will not be able to do so unless we get the economy moving.

Locally, we have real poverty and high unemployment. Youth unemployment has risen to about a quarter of the total number of my constituents aged under 24, as roughly a third of them are, and we are seeing an increase in over-50s unemployment. These are the people who are not gaining but seeing those earning over £150,000 gain considerably. There is a lot that we need to do.

We must look at the unfairness of the cut overall and at the needs of the people who are earning less. I do not think that the money that is supposed to come back will be used to reverse the cuts to further education, to make the banks lend or restore the overdraft facilities of small businesses in my area, or to restore the education maintenance allowance, which had a big impact in helping those in my constituency who wanted to skill themselves up to earn more money—the end of EMA put those people on the back foot. Those matters all impact on the lives of people in Hackney South and Shoreditch today.

A year ago, the Chancellor promised that the measures in the Budget, some of which we are debating today, would boost the economy. What have we seen in the past year? The economy has not just stalled, but shrunk. Again, who suffers the most? It is not the people who have gained from the reduction in the 50p rate of tax, but ordinary men and women up and down the country who are working hard and paying tax. The Chancellor has also had to borrow £150 billion more than planned.

I have mentioned the freezing of the personal allowance overall, but the decision to take away the pensioner element has the biggest impact on those who earn between £10,000 and £29,000 a year. There are not many pensioners in my constituency who earn more than that, although it does have an interesting mix. Being on the edge of a city, there are people of greater wealth in my constituency, but they are not many in number.

Somebody who is due to retire in 2013-14 aged 65 will lose £323 a year, which other Members have talked about at length. It is worth reiterating the point that I made to the hon. Member for Amber Valley: somebody who is on a fixed income or who will be on a fixed income in a year’s time will have to adjust their affairs overall, including their savings if they are lucky enough to have any. That £323 may not seem much to us on our comfortable salaries as Members of Parliament, but for people on low-level fixed incomes of just above the amount where they would get help other than the basic state pension, that will have a real impact on their household income. I reiterate that we must think about the message that that sends out: pensioners are the victims; those earning £150,000 a year or more are the victors. That is unfair.

[Graeme Morrice (Livingston) (Lab)]

Thank you, Mr Deputy Speaker, for giving me the opportunity to contribute to this debate in support of the Labour Opposition amendments.

I was a member of the Finance Bill Committee and attended each of the 18 sittings over the past several weeks; obviously I must have been bad in a former life. It was clear to me that the more the Bill was scrutinised in Committee, the more it was revealed that the Bill, and the Budget that it will enshrine into statute, is the omnishambles that many commentators have described it as.

Once again, the Tories are showing their true colours. It was a classic Tory Budget, with millions paying more so that millionaires can pay less. That is evidenced by the fact that, as we have heard throughout the debate, 14,000 millionaires will receive a tax cut of more than £40,000 a year, while 4.4 million pensioners will lose an average of £83 a year. It is a classic Tory Budget, but with the difference that it was possible only thanks to the support of the Liberal Democrats—the Lib Dems who continued publicly to oppose any change to the 50p rate of income tax immediately prior to the Budget statement but then voted for it; the Lib Dems who, before the last election, repeatedly stated their opposition to immediate public spending cuts, only to support a Budget reduction of more than £6 billion within two weeks of forming the coalition; and, lest we forget, the Lib Dems who promised not to raise VAT and then raised it.

The 50p rate raised about £1 billion in its first year and could have raised £3 billion a year over the lifetime of this Parliament and beyond. Its continuation could have been used to cut fuel duty, not just freeze it, as we agreed in the previous debate. Many of my constituents have written to me about that. It could have been used to reverse the Government’s damaging cuts to tax credits or help reduce the deficit. Instead, the Chancellor chose to give the richest 1% of earners a huge payout. People on middle and low incomes are already being squeezed by rising fuel, energy and food prices. Now, their tax credits and child benefit are being cut. Yet again, the Government have made the wrong choice and proved how totally out of touch they are.

The aspect of the Budget that has undoubtedly caused the most anger among my constituents is the decision to freeze the personal allowance for pensioners, which will help subsidise the Chancellor’s bumper tax cut for the rich. That was buried in the Budget’s small print, and the Government tried to make out that it was a tidying-up exercise. However, nobody was fooled by that. It was clear that it was actually a £3 billion tax raid on pensioners. No wonder that was the only aspect of the Budget that was not leaked in advance.

How will the Chancellor’s tough talk about cracking down on tax evasion and aggressive tax avoidance, which he says is “morally repugnant”, be put into action if the resources of Her Majesty’s Revenue and Customs continue to be cut? Some 10,000 jobs will go by 2015, including 240 processing posts at Pentland House in my constituency.

Labour’s five-point plan for growth offers an alternative vision. If the Government followed our advice and implemented a £2 billion tax on bank bonuses to fund 100,000 jobs for young people, we would begin to see some progress on tackling the scourge of youth unemployment. Instead, millions are left to pay for a Budget for millionaires—a classic Tory Budget, but this time supported by the discredited Liberal Democrats.

Amendment of the Law

Meg Hillier Excerpts

Wednesday 21st March 2012 Commons Chamber

[Mr David Lammy (Tottenham) (Lab)]

This is my first opportunity to speak about a Budget following the spotlight that fell on my constituency in the summer, so I want to begin by supporting some measures in it. Business and shopkeepers on Tottenham high road recovering from the mayhem and violence, burnt shops, broken windows and the loss of business will welcome the simplification of taxes. Many of those small businesses still grumble and talk about the complexity of such regulation.

There has been a lot of concentration in the House over the past few months on the undeserving poor. There has been heated debate, and I have certainly made my views clear on issues such as housing benefit. I therefore welcome the fact that the Chancellor has concentrated his attention on those who play the system in another way, and that he has looked at unearned income and property taxation. The changes to stamp duty and capital allowances are to be welcomed.

I represent the constituency with the highest unemployment rate in London, and it is right that I ask, on behalf of my constituents, whether the Budget does enough to alleviate that tremendous problem. This is only a week after we discovered that 56% of young black men in Britain are unemployed. That is a huge concern which should be shared across the House. All unemployment, among all members of our population, is a disaster, and long-term unemployment leaves serious scars, but we should be particularly concerned about that statistic.

Much has been said about a feral underclass. I do not like the term. The word “underclass” summons up visions of the caste system in India and we ought to reserve the word “feral” for discussion of rodents. However, those in the House who either grew up on working-class housing estates or have significant housing estates in their constituencies will recognise a workless class—those on housing estates turning from being working class to members of a workless class.

I do not want to be completely partisan about that because there was structural unemployment in our system under Labour. We talked about that largely in the context of those not in education, employment or training. NEETs have remained a long-running sore in this country. However, it should be of huge concern to the House that in a constituency such as Tottenham, 6,000 people are unemployed and 21 are chasing every vacancy.

[Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)]

Does my right hon. Friend share my concern about the particularly high unemployment rate among young black men? It is a scourge that has existed in our society for far too long. The recent figures fill me with dread not hope, but the Government’s policies do nothing to help them.

[Mr Lammy]

My hon. Friend, like me, recognises that problem and will know, from the history of Hackney, that this is of such concern because in constituencies across the country, in areas as different as Middlesbrough, Hull, Tottenham and Hackney, we are seeing intergenerational worklessness. I hoped that the Budget would make some attempt to deal with that problem.

In my lifetime, there have been serious levels of unemployment twice before. There was huge unemployment in the 1980s, when it was higher than today, and it was even higher as recently as 1996, when more than 10,000 people in the constituency of Tottenham were unemployed. We are talking about a group of young unemployed people, aged 18 or 19, whose parents were unemployed and sometimes whose parents’ parents were unemployed. That is a disaster for our economy. When I looked at the scenes in August with tremendous and deep concern for what was happening on the streets of London, I realised that often some of the children of those who rioted last time were causing the same the problems this time. That is how scarring unemployment is and why we needed a Budget that got to the heart of growth.

It would be wrong, of course, if I did not welcome what has been said about the film and games industries, but it is right that in London I reflect on whether that will come to the constituencies that need it and matter. Although I of course welcome the decisions on capital allowances in the royal docks area of the east end of London, I want to make what may feel like a parochial point, but which is in fact a serious point. Are we committed to one London—where there are not inner cities, but just one city—or will we continue to show a preference for certain parts of London? Despite the huge problems that exist in the east end, it has Canary Wharf and the Olympics, and it now has a Mayor committed to a new airport in the Thames estuary. In north London, in a concentrated area of poverty in Tottenham and Edmonton, we have seen nothing like it.

With regeneration coming around the Spurs development, I would hope that we, too, might get those allowances. To deal with the jobs problem—I am talking not about highly skilled jobs, but about semi-skilled jobs and some jobs that do not require skills—we will need to attract private investment to give us those jobs. The danger now is that there is an incentive to go to another part of London, concentrating poverty even more deeply in north-east London in particular.

There is another issue in the Budget: not those without employment, but the working poor. We should remind the House that someone working in a constituency such as mine, here in London, might be a dinner lady at lunchtime and likely a cleaner in the evening, or a minicab driver during the day and a security guard at night. Such is the situation for those who are unable to make a living wage in our capital city. Of course, the changes to the personal allowance are desirable for those who are working. However, I might add that these are the very same families who saw their tax credits taken away in the last Budget, so this really is robbing Peter to pay Paul. As we know, those who will benefit from the changes will largely be middle-class families and those who are really well-off.

The decision to give a further tax break to those earning more than £150,000 a year will seem bizarre to my constituents, who have seen their incomes fall. Anyone travelling into central London on the tube from Seven Sisters station, either to look for a job or go to a job, is looking at spending £6.20 a day, whereas someone who decides to come down into central London on the 341 bus will have to pay £4.20 a day. Fares are up by 12% on the bus and 16% on the tube, under the reign of Boris Johnson. Those costs are huge for families with babies, who have already seen their monthly costs go up by £8.20 in just the last 18 months.

The cost of living is going up for the working poor, and there are huge concerns about worklessness, yet we heard nothing about how we are going to deal with that. We still have to wait for the introduction of the youth contract. We have also seen two thirds of apprenticeships in London go to those who are over 25, and it is not at all clear that we have got apprenticeships in the right areas of the economy in our country. What is the growth story? My constituents are still waiting to see what it is. There are huge concerns about equity and fairness in this Budget. I predict there will be further disturbances and concerns until we get a grip and deal with this emerging problem.

--- Later in debate ---

[Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)]

I congratulate my right hon. Friend the Member for Tottenham (Mr Lammy) on the comments he made. For all the Budget figures that we talk about, real people are at the heart. I echo his comments, but I want to talk about the small businesses in my constituency, which I hope, and we all hope, will help to create some of the jobs that my constituents, like my right hon. Friend’s, so desperately need and want.

Hackney is very much a picture of small businesses, with more than 90% of them across the borough as a whole employing fewer than six people—and many of them even fewer than that. The vast bulk of small businesses are located in Shoreditch, in the southern part of my constituency. It is very much the heart of the creative industries and the tech city hub, with nearly 39,000 people employed there. In the Shoreditch town centre area as a whole, there are more than 4,000 in the tech area and more than 5,000 in the creative industries, with about 15,000 people overall. Shoreditch has 77% of the total town centre employment and 93% of all the technical employment.

The growth and dynamism of that area have been going on for some time—before, I have to say, the Prime Minister got interested in it. Of course I welcome any interest shown by the Government in my constituency, but I have to say that some local businesses worry that the increase in rents is partly a result of the talking up in government of the area. Many of the businesses have been there for a long time, as I shall touch on shortly.

[Ms Margaret Ritchie (South Down) (SDLP)]

Does my hon. Friend agree that today’s Budget simply imperils working families and particularly small businesses because it has no measures to mitigate the effects of fuel prices, which are already high in urban and rural areas?

[Meg Hillier]

My hon. Friend makes an important point. The fuel issue is not such a big one in my constituency because of our public transport links, but it is different in areas such as Northern Ireland. I recall having a conversation with a man in Carlisle. He said, “Tell them back in London”—I thought that was illustrative in itself—“that I spend more on fuel in a month than I do on food.” He was just an ordinary working man. It is important for the Government to understand the pressures on household incomes; there are important issues there.

The economy in Hackney South and Shoreditch is dominated by small businesses. It is very creative; we have a big fashion industry, and a digital industry at silicon roundabout. We are seeking to improve and increase that economy all the time. A lot of the small and micro-businesses are struggling. They are not getting the lending that they need from banks, because banks refuse to understand their business models, which are often innovative. They are not even able to get the working capital through overdrafts. That is a real issue. Overdrafts are treated in the same way as loans on the balance sheet. Many of the businesses that I deal with, especially those that are growing and have got to a certain stable point, simply need that facility; they are not seeking a loan. The interest rate cut makes no difference to them. They are seeking an overdraft facility, not a loan.

The interest rate cut announced yesterday makes no difference to those seeking a loan, either, if they have a business model that makes banks nervous about lending to them. One person said to me, “We lend only to vanilla companies”—that is, safe bets with well worn business models. We are talking about an area of bursting creativity, an area that is growing enormously and will and does create jobs, so we need a solution. Merlin was a damp squib; the magic wand did not work. I am not hopeful that the Chancellor’s announcement will make any difference to the small local businesses to which I speak.

There is another key issue for small start-ups. We need 600 desk spaces. For those who do not know the area, if they wander around it, they will see, in cafés, hotels and specially designed work hubs, people sitting with their laptop or iPad; they will be doing business in that fashion. Across the area, a few thousand desk spaces are rented out for about £350 a month. That is how a lot of people do business; they grow that way. In the Trampery, a shared desk space area in my constituency, one business has grown to the point of renting 13 desk spaces. It has decided to stay there because of the creative input, but also because it is a big risk to move from that fluid way of working to permanent premises. That is a type of business that Government and this Budget do not really understand.

As I say, rents have gone up enormously, which is a real challenge. As businesses improve and seek to stay in the area—crucially, they may employ local people if they are in the area for a long time—that causes problems. I do not want my constituency to be the nursery of businesses that move elsewhere simply because they cannot afford to stay. If they move elsewhere for good reasons, that is a different matter, but some of them are being forced out.

I want to give examples of what the Budget really means on the ground. Somethin’ Else is a media production company employing about 70 members of staff in Shoreditch. It has an annual turnover of approximately £8 million. Under Project Merlin, it was not able to get the borrowing facility that it wanted. It simply wanted an overdraft, but that was withdrawn from it overnight during the economic crisis. The company is quite interesting, because it produced a film called “somewhere to”, an Olympic-funded project run by Livity. It featured young people performing in No. 10 Downing street. The Prime Minister was so impressed by the work of the company that, as some Government Members will know, the film was played at the Conservative party conference before his speech in October last year. The very company that was paraded by the Conservative party as a success is struggling precisely because of Government policies.

Not Just a Label is an international business, an online fashion promotion platform. It is the only online fashion design platform in the world. It is present in 93 countries and represents 8,000 fashion businesses, including 1,000 in east London alone. It currently employs 15 people in very small offices tucked away in the back streets of Shoreditch. It is looking to expand and develop: it wants a design showroom to complement its virtual presence. That would involve the company doubling in size within six to 12 months, but traditional banks are not willing to fund that expansion, because they simply do not understand that business model. The “vanilla financing” line was used to that group.

Another business, Image Line, is owned by Sue Terpilowski, who is involved with the Federation of Small Businesses, so she knows a lot about what other businesses are putting up with. She told me that her business rates, for 2,200 square feet, went up by £8,000 this year. Rate increases have a big impact on businesses, and on the face of it, we can see nothing in the Budget on that issue.

There are other pressures on London businesses across the board—I am not talking just about Shoreditch now. London members of the Federation of Small Businesses are taking out loans or overdrafts at interest rates that are very high compared to those available nationally. Some 21% of London members of the FSB have loans or overdrafts at interest rates above 15%, compared with 9% of its members nationally. The 1% in question is merely a drop in the ocean in the context of interest rates that are that high. That issue must be tackled.

Has the Chancellor had any conversations with businesses about more innovative ways of providing working capital, such as the next generation funding models, including funding circles and crowd-funding? Such models might work for the new tech businesses in my constituency, but they need to be regulated. There is a lot of talk of one in and one out, but if we are to have innovative funding models, we need Government support to ensure that they are legitimate forms of funding and that scams do not happen.

The Chancellor has announced his seven short-listed funds. I have my doubts as to whether they will lend to the businesses I am talking about, especially when we consider the much vaunted Green investment bank. We hoped it would support new businesses, but we feel sure that it will be controlled by the Treasury and the available capital will go into some of the bigger known providers.

My constituents want to find work in the job-creating new tech businesses in Hackney, so skills is a key area. We have good support from Hackney community college, which has set up an apprenticeship scheme, working with the tech city hub. Thanks to Government funding, we in Hackney will have a university technical college, under principal Annie Blackmore, opening in September at the HCC. She and Ian Ashman, principal of the HCC, have been working closely to try to ensure that we develop the necessary skills through our schools and colleges so that young people in Hackney can secure these jobs. We must make a link with the people who live just north of Hoxton square and in the rest of my constituency, many of whom do not have access to these jobs because they do not have the necessary skills.

I cautiously support the Sunday trading proposals for the Olympic period, as I recognise that that is a welcome global event coming to my constituency. However, I am also concerned that the move could be a trial run for a permanent change in the law. The leaks about today’s Budget announcements were broadly accurate, and I worry that the leaks about the Sunday trading proposals, suggesting that the Chancellor has a secret mission to take on the low paid and families and to ensure that people will have to work long hours, might also be accurate. My local smaller businesses are also nervous about the proposal. The benefit of longer trading hours is very small for them, but it gives more succour to the big retailers, who are already putting a lot of pressure on such small businesses.

High broadband speeds are much needed, and Hackney council is already seeking to increase speeds, first in Shoreditch and then in Dalston. I do not know the timetable for that scheme. However, although the Chancellor says he is funding it, I want to know whether it is new funding and how quickly it can be drawn down. We certainly need these developments in Hackney.

The Chancellor has, through sleight of hand, suggested that the Government greatly support business. The small and medium-sized businesses in my constituency have yet to benefit, however, so there is a great deal of scepticism about the Budget. I want the businesses in my constituency to grow and the jobs to be created, but I am very worried that this Budget will not deliver.

--- Later in debate ---

[Chris Heaton-Harris]

I would not necessarily condemn them, but I would very much like them to answer the case on why they are doing that. I understand their business case, and people find it interesting when they start to talk to them. I like to think that the measures we have taken in the Budget, whereby we are trying to allow the flow of low interest rate money through our business sector in bigger and better ways—I think, for example, of the seven partners that the Chancellor is now looking at to do that in the future—are a valid way of proceeding.

I also welcome the broadband investment. My constituency is in the heart of England and could not be more different from that of the hon. Member for Hackney South and Shoreditch. My constituency is largely rural with lots of dynamic businesses, including lots of small businesses, based in it. However, we have awful broadband connection. When hon. Members talk about trying to get regular download speeds of 2 megabits, I look at them in awe, because my area is at the end of a copper exchange and we barely get speeds of 1 megabit. Where I live, I still watch my e-mails download, and plenty of hon. Members from across the country find themselves in exactly the same position. If we want proper inclusion across the whole country, we have to have fast broadband. I would settle for fast broadband, although superfast broadband would be a delight, and I very much welcome the measures we are taking on that.

I welcome—not because I am a Tory, but because I was in business—the fact that corporation tax is being lowered. We want to encourage businesses to invest. One way of doing that is by lowering corporation tax and I welcome the trajectory in which we are travelling.

I welcomed the waving of Order Papers when it was announced that this Government are lifting 2 million people out of paying tax, but—

[Meg Hillier]

Before the hon. Gentleman moves from the issue of small businesses, may I ask whether he has spoken to business people in his area about the possibility of a cross-Government body looking at small business administration to make sure that different Government policies do not have perverse outcomes, which Governments of all parties ought to consider?

[Chris Heaton-Harris]

As the hon. Lady knows from the Public Accounts Committee, where we have often talked about such matters, it would be lovely if Government Departments had a holistic approach to any area of policy. If we could start with small business, that would be fantastic, but I do not think we are quite there yet. That is something we would all support across the political spectrum and without political point-scoring.

I was speaking about the waving of Order Papers and the 2 million people being lifted out of paying tax altogether—a thoroughly good thing, which I would like to think is welcomed in all parts of the House. It benefits everyone who is working—people who are trying hard for themselves, have got on the job ladder and are moving forward. I benefit. From what I see on Twitter and other media sources, if people are earning around £60,000, have children and drive a car, they are not in a great place after the Budget. That includes most Members here. We have managed to produce a Budget that penalises MPs, which I am sure our constituents will be relatively happy with. Most people want to see the lowest paid in society not paying tax, and long may that continue.

I have one or two concerns and plenty of suggestions. The Treasury Minister will know of my long-running love affair with onshore wind turbines and what they do to my constituency. Although there was not much about renewables or the subsidy levels, I welcome the words spoken by the Chancellor in his speech. An investment in gas and in nuclear is proposed. If we chose that method to hit our 2020 carbon target, we would save more than £35 billion, compared with the route that we are currently choosing to go down, which involves other types of renewables that cost an awful lot more. The subsidy that is given to landowners and energy companies makes energy cost more, increasing fuel poverty at the other end of the cycle. I suggest wholeheartedly that we look carefully at the policy choices we are making when we talk about energy, green taxes and fuel poverty in the future.

Personally, I do not mind consumption taxes. I know that Labour Members take issue with that, so let me give an example. I would love to see the end of vehicle excise duty. Fuel prices are too high, as we all know because we all regularly fill up our fuel tanks. Getting rid of vehicle excise duty would add, I believe, roughly 1.5p to the cost of a litre of unleaded petrol and diesel. But we would not have to pay vehicle excise duty and we would pay as we drove, so if we drove a gas-guzzler we would pay a lot more. The old lady who drives hardly at all would pay a lot less. There would be a huge simplification of the tax system. That might not work, but I would like us to think outside the box and consider areas where we could simplify taxes.

Living Standards

Meg Hillier Excerpts

Monday 5th March 2012 Commons Chamber

[Mr Gauke]

I want to make a bit of progress, because I know that many other Members wish to speak.

We are also right to reform child benefit to target the families who need it most. I fully understand that child benefit provides a vital boost in parental income for millions of families throughout the country, but it represents a substantial cost to the Exchequer. It makes up about 7% of total social security and tax credit spending each year, including child benefit payments of over £2 billion per year to higher-rate taxpayers. When we face such tight constraints on the public purse, it is right for us to refocus resources where we need them most.

[Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)]

The Minister mentioned the administrative cost of child benefit to the Exchequer. Can he tell us what is the estimated cost of all the extra form-filling that the change will require?

[Mr Gauke]

I was actually talking about the overall cost. We will give details of the cost of administering child benefit when we announce the details of the policy, which, as the hon. Lady will know, we will do shortly. However, as the Chancellor has said:

“We simply cannot ask those earning just £15,000 or £30,000 to go on paying the child benefit of those earning £50,000 or £100,000.”

It is simply not fair for working parents on low incomes to subsidise millionaires. If members of the Labour party believe in that, they can add it to their election literature along with their opposition to the benefit cap. By making these changes, we can continue to direct child benefit to where it is needed most, supporting millions of families and millions of children from birth until they leave full-time education at the age of 18 or even 19.

--- Later in debate ---

[Stephen Williams]

All I can say is that the hon. Lady must have been reading an earlier draft, because that is not what the motion says. I shall discuss tax avoidance later in my speech, as I am sure she will be pleased to hear.

Even in the tough fiscal environment that the Government face, it is right that we should do what we can to help low-income households. That is why the Government are absolutely determined that the budget will not be balanced on the backs of the poorest and those in work who have low earnings. The Government will not repeat the fiasco that happened in good times under the previous Government. The Chancellor who became Prime Minister, in his last Budget as Chancellor, abolished the 10p rate of income tax, raising income tax for the lowest paid in society and all his hon. Friends, who, at the time, sat on the Government Benches and waved their Order Papers with glee that a tax on the poorest in society was funding a tax cut for the rich.

[Meg Hillier]

rose—

[Stephen Williams]

I have given way twice and I am on a time limit, unlike some previous speakers. The hon. Lady will have her turn later.

That is why reducing the tax burden for the lowest paid is the No. 1 priority, as far as the Liberal Democrats are concerned, of this coalition Government. I and all my colleagues stood at the last election on a promise that the income tax threshold would be raised to £10,000 and the coalition Government’s first budget raised the threshold by £1,000 to £7,475 a year, taking 800,000 people out of income tax altogether and giving a £200 tax cut to every basic rate taxpayer. From next month, the threshold will be raised again to £8,105, cumulatively taking 1.1 million low-paid people out of income tax altogether with a cumulative income tax cut for every basic rate taxpayer of £330. That is £330 extra take-home pay, particularly for part-time workers, who are disproportionately women and young people, that they can spend immediately in their communities.

Two weeks ahead of the Budget—16 days, as the shadow Chief Secretary kept saying—the Liberal Democrats want the Chancellor to go further and faster in announcing a timetable to reach that £10,000 threshold in this Parliament. We want to know that when all our constituents go out to work, they will be able to take home £10,000 a year and not face the burden of income tax. That will send out a message that we are determined to make work pay and to reduce the tax burden for everyone on the basic rate of tax.

--- Later in debate ---

[Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)]

We have heard a lot of twaddle from Government Members today. I was shocked that the Minister seemed to agree with the hon. Member for South West Norfolk (Elizabeth Truss) about the need for unregulated child care, as though high-quality, regulated child care is a cost too high for working parents to pay. As a working parent who uses child care, and as someone who represents many young people in my constituency who face having to seek child care, I must say that having lower-quality child care is not the answer. Cost is an issue but lowering the quality is not the answer. I hope the Minister will pick up on that point in responding.

I represent half of a borough that has the unenviable record of being one of the country’s poorest. About 45% of children in my constituency live in out-of-work households or in in-work households that have an income below 60% of the national average. That compares with 22% in the UK as a whole according to 2009 figures.

One in five of my constituents is under 16, so the two changes that the Government are introducing have a very big impact on a very large number of people in my constituency—the youngest, the children who need the support, and their parents as well. Anything that hits children affects Hackney particularly hard. When we are talking about the impact on young people, their life chances and their opportunities, we should not forget the impact that that has on the wider population. It is my constituents who will be paying the pensions of the older population of the rest of the country in time to come. It is my constituents who will be creating the jobs that will pay for this country in time to come. We need to make sure that we give them a little more respect than the Government currently do.

The Government have form in this respect. About a third of my constituency is aged under 24. This group has already been hit massively by the loss of the education maintenance allowance, which had a high take-up in my constituency. For example, one young woman said to me, “By Thursday, when the electricity key was running out, I would pay that,” so she could do her homework and the house would be warm. It paid for basics like that in my constituency. I will not revisit the pain of tuition fees, on which the Liberal Democrats have shown their true colours.

I turn to working tax credits. In my constituency 12,000 families receive tax credits overall. Of those, 4,500 families, which include 8,600 children, are in work and receive both child tax credits and working tax credits. Of the total 12,000 families, 1,100 families receive working tax credit only. Those figures are from December last year, and they hide real people, such as the woman who came to see me on Friday and wept as she said to me, “I’m working 16 hours a week. I want to work more but I cannot find the hours.” She will lose more than £300 a month as a result of the Government’s changes. She has one month to find eight hours of extra work. Where is she going to find that at her level of income?

A related issue, which I am digging into, is school support staff. I have had a number of reports from primary schools in my constituency where low grade staff working 10 or 11 hours a week have been told by the jobcentre that they need to increase their hours to 16, because that gets them off some statistic that the Department is gathering about part-time work. When they went back to the school to ask for extra hours, one head teacher had the wit to go to Jobcentre Plus and say, “Give me this in writing. Tell me who is directing this.” No information was forthcoming.

Those people were being encouraged to give up a good job of 10 or 11 hours a week to find some job somewhere that might be 16 hours a week, but as many of the jobs in low level retail are on zero hours contracts, it is difficult to be guaranteed the 16 hours, let alone the 24 hours. They may get 16 hours now in a good week but not in a bad week, but going up to 24 hours will be increasingly challenging. I talk about my constituency, but as we have heard, up to 200,000 working parents will lose almost £4,000 a year in working tax credit as a result of the changes, which are about three weeks away.

I move on to child benefit. We know that in London child care costs are very high and many of my constituents on good incomes find it unaffordable to work. Their child care would cost more than quite generous full-time earnings, so many have made the understandable decision to opt for one of the couple to stay at home and look after the child. The Minister’s answer was, “Unregulate the child care and make it cheaper”, but that is a retrograde step.

The Government talk about being family-friendly and wanting to support the family unit of two parents with children. The reward for those families for doing what the Government profess to want is a cut in child benefit. What does that mean? If one of the couple is earning £43,000 but the other is not earning and they have three children, they lose £188 a month in child benefit.

[Ian Lavery]

I shall be brief. The hon. Member for Bristol West (Stephen Williams) commented that that is an extreme example. Does my hon. Friend agree that it is not extreme; it is absolutely accurate?

[Meg Hillier]

I completely agree with my hon. Friend. It is rich for the Liberal Democrats to speak sanctimoniously today, when we know what they were saying on the campaign trail just over two years ago.

A family with two incomes totalling £84,000 a year and three children loses nothing in child benefit. The policy is bonkers. It was not even written on the back of an envelope. It must have been written late at night in the bar, because it does not make sense in any way, and the Minister was unable to answer my question about how much it would cost administratively for individuals to collect the paperwork to find people who are on those incomes, in order to take their child benefit away.

We will have the Budget in a fortnight’s time, but my constituents are already being hit. Working tax credit is being taken away from the lowest-paid. There are the cuts to child benefits. We hear from The Daily Telegraph that there might be some changes, but we have heard nothing today from the Minister at the Dispatch Box. VAT has been increased to 20%, affecting the cost of day-to-day purchases for all my constituents. We read of the threat of mortgage interest rates going up. Rents for new social housing will now have to be 80% of private rents, which in my constituency will make it unaffordable for most people—and we can add to that the housing benefit cap, which would affect two thirds of my constituents renting in the private sector, the fact that private rents are increasing exponentially all the time, that energy bills and food prices are going up, that unemployment is increasing, and the loss of the education maintenance allowance.

Many of my constituents may be poor, but there is no poverty of aspiration in my constituency. These policies, layered on month after month and year after year under this wretched Government, are a real kick in the teeth for my constituents, many of whom have come from other countries to do well and to put time and effort into education and training in order to improve their lot. As they are struggling up the ladder of ambition and trying to improve their lot and support their families, the Government are pulling the rug out from under their feet and taking away the lower rungs of the ladder. It is shameful.

--- Later in debate ---

[Sheila Gilmore (Edinburgh East) (Lab)]

If I showed some hesitancy in rising, Madam Deputy Speaker, it is because I tend to find that I am called at the very end of debates, so I am extremely grateful to you for calling me at this stage.

Sometimes Government get things wrong and must have the grace to say so. The change in working tax credit proposed for this April is one of those occasions. Interestingly, it was announced in October 2010, before the Government’s proposals on welfare reform were fully announced and explained. There is an obvious dichotomy between what the Treasury is saying and what the Department for Work and Pensions is saying. It is unfortunate that DWP Ministers have not been present in the debate to give their point of view. Those of us who served on the Welfare Reform Bill Committee had hours of Ministers and Government Back Benchers telling us that any job and any hours of work were better than none, and how important it was that we should be encouraging the mini-jobs that we were hearing so much about. The DWP is very clear that it is important that people should be supported in working, even for relatively short hours, whereas the Treasury Minister who opened the debate told us that it is very important that a couple should work more hours, and that if they do not the Government are going to take their working tax credit from them. Those two positions are irreconcilable. It is not good enough to say that it will all come right next year when the universal credit comes into being, because people will soon be suffering from this change, which is the complete and direct opposite of what the Secretary of State for Work and Pensions has been telling us he is going to do.

Is it really the Government’s position that they want people to stop work, as some people will in this situation because it is more attractive to do so? If the family who cannot find the extra eight hours’ work give up work altogether, then without the working tax credit they will get benefits paid at a higher rate than they would otherwise have received. In addition, if they are home buyers they will qualify for other things such as help with the mortgage, which they do not get if they are working. At that point, they may well conclude that it is not worth their while to continue with their jobs. They may continue to think like that in the future. We hear a lot from the Government, particularly from the Department for Work and Pensions, about how benefits policy should drive behavioural change. This policy will drive behavioural change, but in precisely the wrong direction.

[Meg Hillier]

Does my hon. Friend agree that one of the best things parents can do for their children is to embed the work ethic early on? By working, parents not only bring in an income for their children, but set an example for them and bring future benefit.

[Sheila Gilmore]

There is a long-term benefit in people learning from their parents what it is to work.

We used to hear so much about the couples penalty from the Conservative party. It used to say that there should no longer be a couples penalty and to talk about how unfair it was. However, this provision creates just such a couples penalty. A couple who lose their working tax credit might look at their neighbour, who is a single parent, and think, “She’s not losing her working tax credit. That doesn’t seem fair.” Why, when we have heard so much about that, are the Government creating a new penalty for the sake of just 18 months or two years?

That all comes on top of the decision not to increase working tax credit in line with inflation. We have heard a lot, particularly from the hon. Member for Bristol West (Stephen Williams), about how wonderful it is that benefits will rise by 5.2% in the coming year, as if it is some unique act of generosity. In fact, people are simply being given the rate of inflation.