Finance (No. 4) Bill
Debate between Rachel Reeves and Lord Harrington of Watford(12 years, 7 months ago)
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Rachel Reeves
That is like suggesting that if inflation was 10% and the Government had to increase pensions by £10 a week to keep pace, pensioners should celebrate and thank them. Of course they will not thank them because the increase in pensions only keeps pace with the rising cost of living. If the Government want to take credit for record high inflation, be our guest.
Rachel Reeves
No. Cuts to vital services such as the NHS and to social care and local transport also hit pensioners hard on top of the increases in VAT and the cuts to their pensions.
Many of the worst cuts are still to come. Analysis of the 2010 spending review showed that, on average, pensioner couples would be hit hard by cuts to services, amounting to £1,275 a year or 6% of their household income, while single pensioners stood to lose services worth £1,300 a year or 11% of their income. As we heard from the Treasury Committee yesterday, many pensioners are also paying a price for the Government’s failure to get the economy moving because the Government are relying on the Bank of England to undertake more quantitative easing to prevent the economy from sinking deeper into recession. That means that annuity rates and returns on pensioners’ savings are lower than they would otherwise be.
Rachel Reeves
I thank my hon. Friend and congratulate him on hosting the National Pensioners Convention in Parliament today. It came to make the very point that my hon. Friend just made, and that pensioners made to us in the Committee Room earlier. Some Government Members would do well to listen to some of the pensioners in their constituencies.
It adds insult to injury for the Prime Minister and other Government Members to tell pensioners that they should be grateful for a rise in the basic state pension that merely matches the rate of inflation. It is not a rise—it simply keeps things level. If Government Members do not know the difference, they should get out into the real world, where the costs of food and fuel are going up and it is getting harder and harder to make ends meet.
Rachel Reeves
The idea that pensioners have been protected from the squeeze on living standards is simply not true. It is divisive and distorts reality when Government Members try to make that point, and conceals the fact that many older people are under genuine pressure. We should do what we can to help them, not see pensioners as a soft target for stealth taxes, as the Chancellor so clearly does.
Rachel Reeves
I thank my hon. Friend for that intervention. All hon. Members know that the average rate of inflation for pensioners is often very high—higher than it is for ordinary families—because they spend more of their income on gas, electricity and food, the rates of inflation for which are going up at a higher rate.
Rachel Reeves
My hon. Friend sticks up for pensioners in her constituency, where, as she says, there are many pressures on their costs and standard of living.
In fact, the only people insulated from the Government’s unfair choices and economic failures are the wealthiest. The richest 10% of people over the age of 65 will be wholly untouched by the tax increases that we are debating. Indeed, those with incomes over £150,000, including, we might note, some members of the Cabinet, will benefit from the cut in the 50p rate of tax that we debated yesterday.
Richard Harrington
I am so extremely grateful to the hon. Lady for giving way—I hope she will forgive my perseverance. Having listened to her argument in some detail, I should like to ask her a question. Principle is very important to her. Does she believe that under-65s should have a lower personal allowance than over-65s as a point of principle?
Rachel Reeves
Winston Churchill was right in 1925 when he introduced that measure. People who are retired have fixed incomes, as a result of which there are more pressures on them and they cannot make up the additional changes. That is why the Opposition will vote against the Government’s change. We do not think it is the right priority or the right thing to do at this time, especially because the money is not being used to help young people to get back to work, to help the poorest pensioners or to help families of children who are struggling with the rise in the cost of living. Instead, the money is being used to give a tax cut of £40,000 to 14,000 millionaires. I can tell the hon. Gentleman what my principle is: we should prioritise ordinary families, ordinary pensioners and young people who are out of work, not those on multi-million pound salaries. That is my principle and those are my priorities. I am sorry that Government Members do not share them.
That is the second reason why the Opposition are opposing the tax increase on millions of modest-income pensioners. As my hon. Friend the Member for Pontypridd (Owen Smith) so eloquently expressed on Monday, the measure is unfair and unnecessary when the Government are spending £3 billion on a tax give-away for the richest 1%. Hon. Members will remember that, originally, the Government said that the 50p tax cut would be paid for by a mansion tax and a crackdown on tax avoidance. However, the cut costs 10 times as much as is raised by the new measure on stamp duty—the Chief Secretary’s sorry substitute for a mansion tax—and more than three times as much as is raised in the Budget by reductions in tax avoidance. In fact, cutting tax avoidance should be part of every Budget anyway, and the money raised by measures to tackle tax avoidance in this Budget is less than the average reductions in tax avoidance achieved by Labour’s Budgets. In addition, we have since discovered that the Government’s definition of tax avoidance includes donations to UNICEF, Macmillan, the Royal National Lifeboat Institution and other charities that do fantastic work in our communities. That the Government cannot see the difference between tax avoidance and giving money to worthwhile causes again shows how out of touch they are.
Meanwhile, the single biggest revenue raiser in the Budget is the measure before us. More than £3 billion over the next five years will be raised from the pockets of pensioners with modest incomes. Where does it all go to? Does it go towards paying down the deficit? No. Does it help young people to get back to work? No. Does it help poorer pensioners? No—they have been hit too by VAT rises and service cuts. Instead, the money, which is being taken from those with pensions of just a few thousand pounds a year, is being spent on a tax cut for people for whom this tax grab would have counted as mere small change.
The Government were said to have been surprised by the anger that the measure has aroused, but that again goes to show how out of touch they are with the reality faced by most people, and how far they have strayed from the values and priorities of the British people. It goes to the heart of the problems that the Government face and the problem with their conception of fairness, and the callous arrogance with which they have abandoned the pretence that we are all in it together.
Age UK responded to the Government’s measures by stating:
“we feel it is disappointing that the Budget offered a tax break of at least £10,000 to the very wealthy while penalising many pensioners on fairly modest incomes who are already being squeezed”.
The chief executive of Saga said:
“Over the next five years, pensioners with an income of between £10,500 and £24,000 will be paying an extra £3 billion in tax while richer pensioners are left unaffected.”
The National Pensioners Convention, which I met earlier today, stated:
“We have been inundated by pensioners who are disgusted that those on around £11,000 a year will no longer get additional reductions in their tax…whilst those earning £150,000 or more will see their tax bills reduced. This is seen by many as the last straw…Pensioners feel they are being asked to bail out the super rich…and it’s simply not fair.”
Age UK, Saga, and the National Pensioners Convention have hit the nail on the head. It is just a shame that the Chancellor and the Prime Minister are so blinded by the demands of the super-rich that they fail to see it.
Finally, it is worth recognising that the measure is not the only reason why people are so angry. It is not just the blatant unfairness that has offended people, but the way in which the change was announced. Most people believe that our older generation deserve to be treated with respect and dignity, yet this Government and the Chancellor tried to get away with going back on a previous promise by dressing up a tax grab as a “simplification”. Just one year ago, on page 35 of the 2011 Budget Red Book, people were told:
“For the duration of this Parliament…the age related allowance will be over-indexed”
according to
“CPI and will increase by the equivalent of the…RPI”.
What the Chancellor said then was clear and unmistakeable, but that is another broken promise by the Conservatives and their Liberal Democrat friends. The Institute for Fiscal Studies agrees. It says that the Chancellor
“should have avoided dressing up what is clearly a tax increase as merely a simplification”.
In the same letter from Age UK to the Chancellor that I have quoted, it also states:
“We are concerned that you announced the change to age allowances as a way to simplify the tax system and indeed the Budget Report lists the change under…‘Simplification’... rather than under ‘Personal and Property taxes’”.
The Chancellor also attempted to hide behind the Office of Tax Simplification, but its director has told the Treasury that attempts to use its recommendations as a cover for his tax grab are “not 100% accurate”. The relevant report by the Office of Tax Simplification states clearly:
“we would stress…that the Office of Tax Simplification has not reached any conclusions as to the best way forward with age-related allowances, nor have we formulated detailed recommendations”.
It is all too clear why the Chancellor did not bother to wait for the final OTS report: he was not really interested in simplifying taxation for older people. Rather, his single-minded focus and overriding priority was getting his millionaires’ tax break through, and he was willing to fund it by cutting the incomes of pensioners.
In conclusion, we all know what an embarrassment this Budget has become to Government Members. We know how it has shaken their confidence in the strategic genius of the Chancellor and that many of them have heard from constituents who are anxious about the impact that the measure will have and angry about how the Government have treated people who deserve better.
Therefore, today, the Opposition are glad to be giving Government Members an opportunity to make amends and a chance to dissociate themselves with this disreputable raid on the incomes of older people. They have a choice. Do they stand with the millions of people who have worked hard and saved what they can? Or do they stand with the Chancellor and his friend, the Chief Secretary, who see pensioners as a soft touch ripe for a sneaky tax grab? The Opposition know whose side we are on. We are about to find out whose side Government Members are on.