Finance Bill

Debate between Rachel Reeves and Edward Leigh

Tuesday 3rd July 2012 Commons Chamber

[Rachel Reeves]

That is the first time I have heard a Finance Bill being called a consultation—I do not even know where to start.

The Budget in March also included a 3p rise in fuel duty in August and limits on charitable donations. All this was necessary, we were told, to deal with the deficit. Yet the Bill before us, as we reach Third Reading, contains none of those measures. We have had a series of abrupt reversals that, according to one estimate, will cost the Exchequer nearly £700 million.

Opposition Members argued that these measures were misconceived from the start, and that adding to the costs faced by families and small business at this time would make it even harder for our economy to climb out of the recession that this Government have dug us into. But it must be a matter of regret that so much uncertainty and confusion has been created for those affected, doing real damage to businesses, charities, pensioners and families, and that at a time of tight public finances the Government’s financial and fiscal planning seems to be in such disarray, with no one at all clear what the Government’s priorities actually are.

Despite the Government’s belated change of heart on those matters, the Bill remains a deeply flawed, unfair and utterly inadequate response to the problems facing our country today and that is why the Opposition will vote against it this evening. The Bill still offends against the most basic principles of fairness by giving priority to a reckless and irresponsible tax cut worth tens of thousands of pounds for a few thousand millionaires while at the same time asking millions of ordinary people who are already under pressure from rising prices, falling wages and cuts to tax credits and benefits to make further sacrifices and endure further hardship.

The Bill breaks a promise that the Chancellor made in the Budget last year to Britain’s pensioners that their age-related allowance would rise in line with inflation for the rest of this Parliament and instead imposes a stealth tax that will hit 4.5 million people over the age of 65, all of whom live on modest pension savings. The Bill is breaking the principle of universal child benefit and still means that one-earner families will lose thousands of pounds a year while a two-earner family on almost twice as much will keep all their benefit. It is a botched, half-baked measure dreamt up for a party conference speech but the measures are described by the Institute of Chartered Accountants in England and Wales as a “policy disaster” that are

“in danger of becoming a practical disaster when they come into effect”.

We have raised a number of other concerns about the Bill, such as the controlled foreign companies changes and the impact that they will have on developing countries. What is most wrong with the Bill, however, is that it represents a massive missed opportunity to end the recession and get our economy working for ordinary working families, pensioners, businesses and young people. It could have been a Bill that took the tough decisions necessary to ensure that those who could make a fair contribution to deficit reduction did so, so that those hit hardest by the current crisis were not put under even more pressure.

It could have been a Bill that cut VAT, giving immediate relief to hard-pressed families and giving our economy the stimulus it needs to get growth under way again and to make unemployment fall. It could have been a Bill that redirected money wasted on excessive bank bonuses and put those resources to better use, helping young people get back to work and constructing new affordable homes.

[Mr Edward Leigh (Gainsborough) (Con)]

Where would the money have come from?

[Rachel Reeves]

The Government are borrowing £150 billion more. That is the cost of the Government’s failed economic policies. The reality is that with more people out of work claiming benefits and fewer people in work paying taxes, Government borrowing is higher and not lower.

Finance (No. 4) Bill

Debate between Rachel Reeves and Edward Leigh

Monday 16th April 2012 Commons Chamber

[Rachel Reeves]

My hon. Friend speaks from her knowledge of her constituency in Hull and of the East Riding of Yorkshire, which will be particularly affected by changes to the caravan tax.

I was in Leicester on Thursday last week with my hon. Friend the Member for Leicester South (Jonathan Ashworth), speaking to small businesses which will be affected by the changes to VAT on hot snacks. Many businesses are worried, about both the additional tax they will have to pay and the additional bureaucracy of form-filling. As hon. Members said, it is not at all clear at which point VAT will stop being charged. What temperature does the food have to be, or by how much must it have cooled down before the tax rate goes to 0% from 20%?

We will also have a chance this week to debate and vote on important tax simplification measures. Given the generous decision of the Chancellor to simplify the tax arrangements of 4.4 million pensioners, I am surprised that they are not more grateful. That tax simplification will cost pensioners £83 a year on average and will cost hundreds of thousands of people who are coming up for retirement next year up to £322 a year.

The Chief Secretary referred to the Office of Tax Simplification. Its tax director has registered his concern about the changes to the tax allowance for pensioners and has said that the Government’s claim that they were only following its recommendations

“was not 100 per cent accurate”.

Meanwhile, Age UK was moved to write to the Chancellor about the change to tax allowances for pensioners. It stated:

“Age UK supports the OTS review of pensioner taxation and was very pleased to have been invited to be represented on the consultative committee. However given the OTS was set up with the aim of providing”

the Chancellor

“with independent expert advice on simplification we are very surprised and disappointed that”

he has

“announced a change to simplify the system without waiting for that advice.”

Contrary to coalition spin, this tax simplification will hit not those with big pension pots, but people with personal or occupational pensions that pay around £5,000 a year. It will hit people who worked in ordinary jobs for modest salaries, and who made sacrifices during their working lives to put away just enough to give themselves a small pension, which means that they do not need to depend on means-tested benefits in retirement. It is simply not true that they have been insulated from the effects of the current economic climate and other changes to taxation. Pensioners have been hit hard by VAT, quantitative easing, cuts to services that they rely on—not least the national health service—and massive increases in the heating and electricity bills for their homes. Older people deserve better than this mean-minded, penny-pinching measure. If Government Members agree, they will have a chance to vote down the granny tax later this week.

It tells people all they need to know about this Government’s priorities and the balance of power in the coalition that when the Deputy Prime Minister said that he would agree to cut the 50p rate if it was paid for by a mansion tax and the Opposition said that we would support a mansion tax if it was used to relieve the pressure on ordinary hard-working families, the Chancellor forgot the mansion tax, cut the 50p rate anyway and paid for it with a raid on pensioners’ incomes and a raid on charities.

Finally, we will offer the Chancellor a last chance to make good the great omission of the Bill—its failure to offer a shred of hope to the 1 million young people who are desperate to find work and its failure to do anything about the fact that long-term youth unemployment has more than doubled in the past year. Our amendment will open the way for the funding of a guaranteed job for every young person who is out of work for more than a year—a job that they would have to take up. That is the kind of measure that our country is crying out for. It would change the lives of thousands of young people and transform the prospects for our economy. It could easily be funded by raising new resources from the banking sector, which still squanders billions on bonuses while doing little to support British businesses and families. We will therefore offer Members a chance to vote for the reinstatement of the tax on bank bonuses to fund the creation of 100,000 new jobs for young people and the construction of 25,000 new affordable homes.

[Mr Edward Leigh (Gainsborough) (Con)]

If the 50p tax rate was such a painless revenue raiser, why did the Labour Government take 13 years to implement it?

[Rachel Reeves]

As the Chancellor once said, we are all in it together, and if we have a deficit to reduce it is right that those with the broadest shoulders bear a little more of the burden. That was why the former Chancellor increased the top rate of tax to 50p. This Government have reduced it and are instead asking millions of ordinary families and pensioners to pay more so that millionaires can pay less. That is their priority; the Opposition’s priorities are very different.