Finance (No. 4) Bill

Debate between Owen Smith and Karl McCartney

Wednesday 18th April 2012 Commons Chamber

[Karl MᶜCartney]

Thank you, Mr Hoyle for letting me continue. I feel I ought to correct what might be an untruth: I did not break the leg of the hon. Member for Rhondda. I gave him quite a good pass—not even a hospital pass—on the rugby field and the two large gentlemen who were about to tackle me then tackled him.

The independent Office for Budget Responsibility agrees that the 50p rate raises only a fraction of what was supposedly intended. So, one of my questions to the Chancellor and his Ministers is whether they know of any reason why any Member would disagree with the highly respected OBR other than for disingenuous political gain.

The 50p rate is bad economics. The previous Labour Government’s Chancellors and Prime Ministers and the Labour party’s current shadow Chancellor, the right hon. Member for Morley and Outwood (Ed Balls), are well aware of that privately but cannot bring themselves to acknowledge it publicly. Ultimately, it is the highest tax rate in the G20. Our Government are clear where they stand on the 50p tax rate: it has not raised anywhere near the revenue expected as many individuals cleverly engaged their own or their accountants’ knowledge to bypass the rate and lower their tax bills. The Government have now sent out a clear signal to the international community that Britain is open for business and will no longer have the highest tax rate in the G20. The same clear signal cannot be said to be coming from those on the Opposition Benches.

[Owen Smith]

Will the hon. Gentleman give way?

[Karl MᶜCartney]

Not at this point.

It has been interesting—and would be again—to hear from the Chancellor or his Ministers what positive signs we have seen from businesses after he announced the change. Once again, why does the Labour party fly in the face of business leaders’ opinion? As I have said, the 50p tax rate raises only a fraction of what was intended and is bad economics. It is better to put the British economy first, ahead of cheap headlines, but then that was never the Labour way, was it? One would have thought by now that Labour might have learnt some economic lessons.

The cut in the 50p tax rate was never a priority of this Government. Raising the personal tax allowance and helping low and middle income earners has always been the No. 1 priority tax cut for the Government and that is what we have done. This is a Budget to be welcomed by all with far-reaching tax reform that Labour should be embarrassed it never even considered. It announces the largest ever increase in the personal tax allowance, which will benefit 24 million ordinary families up and down our country. Most basic rate taxpayers will gain at least £220 every year. In total, this Government will have taken 2 million low paid people out of tax altogether.

Labour spent much of the aftermath of the recent budget indulging in photo calls in unfamiliar territory for Labour Members—any pasty shop they could find. Even an unannounced visit to my own constituency of Lincoln by the photogenic brother of the Leader of the Opposition, the right hon. Member for South Shields (David Miliband), featured such a stunt. Among all this new-found fondness for pasties, but perhaps notably not for one bottle of a famous brown sauce, the Leader of the Opposition has strongly criticised the decision to cut the top rate from 50p.

The right hon. Member for Doncaster North (Edward Miliband) made a laughable claim when he said:

“After today’s Budget, millions will be paying more while millionaires pay less.”—[Official Report, 21 March 2012; Vol. 452, c. 809.]

He is the true heir to Blair, is he not? Soundbite, not substance—and not even basic mathematical understanding. After this Budget, not only will millions of people pay less tax, but many low earners will pay little or no income tax. If, as we know, the 50p top rate raised only a fraction of what was intended and in addition harmed our international competitiveness and, as other Budget changes have ensured that the direct cost of the reduction to a top rate of 45p has been mitigated many times over, that should surely be welcomed by Members on both sides of this House.