Income Tax (Charge)

Debate between Pat McFadden and Tom Hunt

Thursday 28th October 2021 Commons Chamber

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

It is a pleasure to respond to today’s debate on behalf of the Opposition. Although the Secretary of State for Business, Energy and Industrial Strategy is not in his place, I begin by congratulating him on becoming a father for the first time. He would not tell us his age, but if he is an older dad, as I was, I suspect that he is learning the reason that people have children in their 20s and 30s. That is a lesson that we learn when we have them a little bit older in life, so I give him my full solidarity and best wishes on his new baby.

I thank all right hon. and hon. Members for their contributions to the debate, which were wide-ranging. Several hon. Members talked about the need for business rates reform in the longer term, which the Opposition very much support. Others raised continuing issues with universal credit and made the point that the changes made yesterday will benefit only a minority of those affected by the cut of £20 a week that was implemented a few weeks ago. There were also contributions on artificial intelligence, the return of inflation, bank closures and many other issues.

Several Welsh colleagues raised coal tip safety. My hon. Friend the Member for Merthyr Tydfil and Rhymney (Gerald Jones) rightly reminded us that it has been just over 55 years since the tragedy in Aberfan. I remember visiting the graveyard in Aberfan as a young man with my friend Huw Lewis, the former Assembly Member for the constituency: I will never forget the pictures of children on the graves, lovingly cared for and frozen in time forever. Fifty-five years on, I hope that the UK Government and the Welsh Government manage to reach agreement on securing the safety of coal tips for the future. I thank hon. Friends for raising the matter.

The Budget, like all Budgets, covered many things, but the stand-out feature was the Chancellor’s admission that taxes are set to rise to their highest levels since the early 1950s—higher than under Norman Lamont, higher than under Ken Clarke, higher than under Denis Healey, higher than under any of the Chancellor’s predecessors. Corporation tax, personal allowance freezes, national insurance, council tax—there is one tax rise after another. A new analysis today shows that the combination of them is set to mean £3,000 more in taxes per household than when the Prime Minister came into office.

The reason for all the tax rises is simple: the Tories have become the party of high taxation because they are the party of low growth. In the 11 years in which they have been in office, economic growth has averaged just 1.8%. In the previous decade, it averaged 2.3%.

[Tom Hunt]

I find it somewhat unbelievable that the right hon. Member cannot see that perhaps the £407 billion that we spent fighting the pandemic might have something to do with what he has just identified.

[Mr McFadden]

If the hon. Member reads the OBR report, he will find that it says very clearly that the effect of the pandemic is smaller in the long run than the effect of the low growth over which his party has presided for more than a decade.

As I was saying, in the decade before the Conservatives came to office, growth averaged 2.3%. Let us look at what the difference between those rates means to people. The difference, added up over the years, is worth £9,000 a year to every household in the country, and from the Exchequer’s point of view, the difference would be £30 billion a year more to fund our public services. It is that more than anything—that appalling record on economic growth—which has forced the Chancellor to raise taxes. The British people are being forced to pay the price of the Government’s long-term economic failures.

The long-term effect of this lack of growth is far greater than the impact of the pandemic. When we look beyond the huge fall in GDP last year, due to the pandemic, and the bounce back from it this year and next, the growth picture does not change. The OBR is predicting economic growth averaging about 1.5% between 2024 and 2026. It is that low growth which creates the projections of real wages barely rising in the coming years. In his dreams, the Prime Minister is Winston Churchill; in his rhetoric, the Chancellor is Margaret Thatcher; but in its actions, this Government is Ted Heath.

The Chancellor and the Prime Minister have trapped the country in a vicious circle of low growth, rising inflation, stagnating incomes and rising taxes. The economic legacy of this Chancellor will be a country on the path of low growth and high taxation, but his political legacy will be as the man who buried forever the Tories’ reputation as a low-tax party.