Income Tax

Rushanara Ali Excerpts

Wednesday 5th November 2014 Commons Chamber

[Rushanara Ali (Bethnal Green and Bow) (Lab)]

I do not envy the historian who will eventually write the book on the record of this Government. When such a history is written, the decision to cut the 50p top rate of tax will surely be seen as a turning point—the moment when this Government revealed their true colours; when they talked of hard choices for those on lower incomes, while awarding the richest 1% a tax cut worth £3 billion; and when the phrase “We’re all in this together” turned into material for satire.

People in my constituency and across the UK are facing a cost of living crisis, the scale of which the Government are unable to understand or empathise with, never mind tackle. The one part of the previous speech that I agreed with was the bit at the end, about how so many people continue to struggle. We all need to come up with a way forward that serves their interests. That is what I want to focus on. On average, households will be £1,600 a year worse off by 2015 due to tax and benefit changes made by this Government. Changes made to taxes and benefits since 2010 have meant that families where one parent is working to support children are nearly £4,000 worse off.

Let us consider youth unemployment, which is still close to 800,000. Why is it that Government Members—[Interruption]—I hope the hon. Member for Taunton Deane (Mr Browne) will stop heckling—cannot consider how this tax break could have instead been used to get those 800,000 young people back to work? Surely they deserve a chance to make a contribution to our economy. Time and again—

[Mr Jeremy Browne]

Will the hon. Lady give way?

[Rushanara Ali]

I think the hon. Gentleman has had plenty to say already. I am going to continue, because the time limit—

[Mr Browne]

rose—

[Rushanara Ali]

If I get through my speech without the hon. Gentleman interrupting and heckling, I might consider giving way to him.

Time and again, it is those most in need who are suffering on this Government’s watch. Shockingly, 2.6 million children across the UK face poverty, which is 600,000 more than in 2010. The recent report by the End Child Poverty coalition found that half the children in my constituency are growing up in poverty, a figure that has risen since 2010. Of those, two in three are in working households. One in five people across the country face low pay. Against that backdrop, it says everything about this Government that they chose to focus their efforts on reducing tax rates for the highest earners. Surely we should think about putting in place a more just and fairer tax system, but also one that gives opportunity to young people who are out of work.

Those working people across the country who are struggling at the moment will no doubt wonder why this is happening. In this House, the Chancellor said in 2011 that he was

“not going to balance the budget on the backs of the poor”.

At the same Budget, he went on to say that it would not be right to remove the 50p tax rate, asking those on much lower incomes to make sacrifices. The Government should be clear: the working people in constituencies such as mine and beyond do not feel as if they have stopped making sacrifices. We must keep remembering that. They have not stopped making sacrifices. Those people face low wages and they continue, day in, day out, to experience hypocrisy from this Government, who refuse to tackle poverty—both in-work poverty and child poverty—and when child poverty continues to rise, year in, year out. It is a disgrace and it needs to be taken seriously.

The hypocrisy continues. Only last month, the Chancellor remarked at the Conservative party conference:

“there remains a large budget deficit and our national debt is dangerously high.”

What was his answer? It was a two-year freeze of tax credits and benefits, yet two thirds of those who will be affected are in work. Such a measure, hitting the least well-off, is deemed necessary, but the pressure on the top earners is off. How is that acceptable? How is that fair? How is that justified?

[Ian Swales (Redcar) (LD)]

Will the hon. Lady give way?

[Rushanara Ali]

If I am going to give way, it will be to the hon. Member for Taunton Deane—unless he starts heckling again.

According to calculations by the Office for Budget Responsibility, the Treasury lost around £200 million from top earners due to them deferring income, as my hon. Friend the Member for Nottingham East (Chris Leslie) said in his opening speech. The Chancellor will also struggle to resist calls to cut the top tax rate even further, as he and the Prime Minister have refused to rule that out. Perhaps the Minister will clarify whether the rate will be reduced further, or perhaps she will be able to rule that out.

Our approach on the Labour Benches is about a broad-based recovery, where everybody makes a contribution and where those who are most able to can make a bigger contribution. If we are serious about getting people back into work and giving young people an opportunity, this tax cut should be reversed. We need fairness embedded in the tax system, starting with top earners. That is why I support today’s motion.

I am happy to take an intervention from the hon. Member for Taunton Deane now, but I hope he will show some manners.

[Mr Jeremy Browne]

I am always respectful of good arguments in this House; I just do not understand the hon. Lady’s argument that the way to help with youth unemployment is to have a much higher top rate of personal tax than existed under Tony Blair. We have had a fall in youth unemployment under this Government. We have had a fall since the top rate of tax was cut from 50p to 45p, and we have a much lower rate of youth unemployment than France, which has higher rates of personal tax on high earners. With all due respect, I just do not understand the central premise of the hon. Lady’s speech, but at the end of it maybe she can clarify it for me.

[Rushanara Ali]

The hon. Gentleman seems to have forgotten that we got a 1 million young people into work, while over the last four years youth unemployment has remained close to 1 million. It has only recently gone down, but it remains at some 800,000. Perhaps the hon. Gentleman could explain to those young people who do not have an opportunity, who have been unable to get work and who do not have much to look forward to when it comes to making a contribution by getting jobs what he and his party, working with the Government, propose to do about it. Frankly, he is living on another planet if he cannot understand the plight of some 800,000 young people who remain unemployed today.

Time is running out, so I shall conclude by saying that we need to think carefully about how best to support those who cannot manage to make ends meet. We need to be aware that the £3 billion-worth of tax cuts could have been used to stimulate the economy by supporting those who are not in work at the moment. Frankly, that £3 billion could be used to create more apprenticeship and training opportunities for those not currently in work. I hope that Government Members will consider what it means to create a fairer society. It does not mean giving tax breaks to those who are most well off—the top 1%—when everyone else in our country is struggling.

--- Later in debate ---

[Rushanara Ali]

I understand that the hon. Member for Harlow (Robert Halfon) said on “ConservativeHome” that the 50p tax rate would make the Conservatives look like they were looking after vested interests.

[Mark Garnier]

The hon. Lady will have to ask my hon. Friend about that. I was referring to the shadow Chancellor and saying that if my hon. Friend was at the conversation he would know what was said. In any case, my hon. Friend has a career in front of him.

We need inward investment. We have talked about the 1970s when we had exchange controls in a very different type of economy. Now we need to set a direction of travel to provide absolute certainty to any company looking to invest in this country. It can never, ever be the case that the message coming out from this place is one where politics overrides the interest of investors coming into the country. The hon. Member for Bethnal Green and Bow talks about vested interests, but if we are referring to the vested interests of someone who is going to invest in this country, I would do everything I could to support those vested interests, because it means bringing jobs for my constituents. The more jobs they bring, the higher the salaries, the better the standard of living. It will work.