Sheila Gilmore
Main Page: Sheila Gilmore (Labour - Edinburgh East)Department Debates - View all Sheila Gilmore's debates with the HM Treasury
(12 years, 5 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Miss Smith
The hon. Gentleman has given me the perfect opportunity to note that, regrettably, the official Opposition’s Benches are astoundingly empty. The stance that they took last week showed astounding political opportunism, given that they had 13 years to support the motorists but did not, and that they left behind a depth charge of increases. I regret that I shall not be able to hear him put the case in his own words. Perhaps I may explain to him more of the actions that we are taking to support the motorist and businesses.
Businesses are seeing successive cuts in corporation tax, coupled with an extended business rates holiday for small businesses until April 2013. In passing, I should note that the high pump prices of recent years are causing real difficulties in ensuring that motoring remains affordable. However, pump prices have fallen by nearly 11p a litre since their peak in April. That said, at a time when money is tight, deferring the fuel duty increase from August to January will provide further support to motorists.
This is a Government who not only have a credible plan to support motorists, but are dealing with the debts created by the previous Government. A responsible Government are able to listen to, consider and respond to the concerns of motorists. Compared with the plans that we inherited, we have cut fuel duty, cancelled the previous Government’s escalator and introduced a fair fuel stabiliser.
I understand that we will also be discussing what the Opposition have planned for motorists, perhaps in some detail. I also look forward to hearing from my right hon. Friend the Member for Bermondsey and Old Southwark (Simon Hughes) on biodiesels. I look forward to responding on those matters. This Government are on the side of motorists and our measures will support them when times are tight.
Sheila Gilmore (Edinburgh East) (Lab)
On Second Reading, we were given to understand that the fuel duty rise was essential to the Government’s proposals and a key piece of the jigsaw in resolving the deficit. For many weeks, that has been the clear message from the Government. I understand that Government Back Benchers were exhorted to write to their constituents to tell them why—regrettably, no doubt—the rise would have to happen and there was no alternative. It therefore comes as rather a surprise to hear that it is not quite so essential to the Government’s plans after all, but is a dispensable piece of the jigsaw.
This is probably the most expensive of the U-turns that have been performed over the past few weeks. It dwarfs many of the others in terms of revenue forgone. It is all very well for the Minister to tell us that it has happened because we have a listening Government, but they must also listen to what they have been saying. On that basis, they must explain how they have come to this position.
Lyn Brown (West Ham) (Lab)
Does my hon. Friend have any idea how much the U-turns have cost collectively so far?
Sheila Gilmore
I understand that it is in the region of £725 million. That is quite a large hole in what was presented in March—it seems a long time ago now—as a balanced Budget. That was one of the Chancellor’s key themes in his Budget speech. We now appear to be faced with something of an unbalanced Budget.
Sheila Gilmore
It is clear from the pattern of fuel duty rises under the last Government that such things were never set in stone and were not intended to be so. One has to look at the situation with which one is faced.
Miss Chloe Smith
The hon. Lady has a touching faith in the previous Government’s ability to stick to a course. Does she support Opposition new clause 11, which has a price tag of about three times as much as the new clause that she is attacking?
Sheila Gilmore
We have very different views about how to stimulate and boost the economy. The Government have run demand into the ground, for example by raising VAT to 20%, which has had an effect on fuel. Ministers are reluctant to talk about that in any detail. It has to be remembered that prior to the election, the Conservatives were going around telling us that there would be no increase in VAT, and their coalition partners liked to stand in front of huge billboards saying that they feared there would be a VAT bombshell but were completely against it.
Mr Jim Cunningham (Coventry South) (Lab)
Has my hon. Friend noticed that oil and petrol prices have dropped by 28% over the past three months? That is not reflected at the petrol pumps, and surely the Government should do something about that.
Sheila Gilmore
My hon. Friend makes an important point. When the raw product goes up in price, the pump price goes up very quickly, but a downward turn seems to take a great deal longer to reach the consumer. We have made similar arguments about other energy price rises.
The hon. Member for Argyll and Bute (Mr Reid) suggested that it was all right for the Government to make U-turns such as this, because they had found savings elsewhere. That is nice to know, but if such savings could be found so easily, maybe the Government could have avoided some of the other things they have done. After all, we spent a lot of time in the Budget debate and before talking about the plight of couples who were losing tax credits because they were deemed not to be working enough hours. That change affects a small number of people—from memory, I believe it is about 500,000. We were told that if it were not implemented, it would cost the Treasury £500 million. We were told that it was impossible to go back on that decision, because money was so tight.
Like all Governments, the current Government are making choices. In the past two years, they have said that certain things have to be done and are not choices. They have said that they have been forced into them. However, all Governments make choices—that is part of governing.
Julie Hilling
Does my hon. Friend recognise that the Government have chosen not to do a U-turn on the granny tax, which is aimed at the people who are least able to pay, but continue to reduce the top rate of tax?
Sheila Gilmore
Indeed, and a lot of people would be glad to see the Government make U-turns in other areas, and in fact in their entire economic policy. It has been misguided, and the Opposition were clear from the start that it was the wrong way to reduce the deficit.
Sheila Gilmore
That is a very important point. We had a semi-answer from the Government saying that savings had been found, but they seem to be somewhat mysterious savings. We had not heard about them before, and we still do not really know where they have been found.
Miss Chloe Smith
Has the hon. Lady not read the Office for Budget Responsibility’s forecasts or the reports identifying about £4 billion of underspend in each of the past four years?
Sheila Gilmore
If the Economic Secretary is so clear that there is money to be used, I once again have to press her on some of the choices that the Government have chosen not to make. From what she has just said, it seems to me that there may be scope for her to reconsider some other matters.
I have a constituent whose employer, a big national department store, recently told her that she had to go completely flexible with her working hours. That meant that her shifts could vary from day to day. When she said that that could be very difficult for her, because she had child care arrangements to make and could not simply change things at short notice, she was told that she could reduce her current 18-hour week to a 12-hour week. We are told that such people should easily be able to find more hours of work to get around the problem of having their tax credits removed. If there is so much underspend, perhaps the Government should think beyond their proposals on fuel duty. It does not give us a great deal of confidence when they are adamant that they are not going to change things, but then do so before thinking about where they are going to find the money.
Sheila Gilmore
It could, and there could also have been significant investment in the building of affordable housing, which is dear to my heart. That would not just give people houses but create jobs and apprenticeships and boost the local economy. The Government could have done that if they had really wanted a Budget for growth. Our criticism of the Budget was that however balanced it may have seemed—it now turns out not to have been quite so carefully balanced as we were told—it was not a Budget for growth. Very little was put into building up jobs and growth. Perhaps it was only a practice Budget, although I always thought that was what the autumn statement, which used to be called the pre-Budget report, was for.
David Rutley (Macclesfield) (Con)
Fiscal responsibility is clearly an overriding priority, but does the hon. Lady agree with President Hollande, who recently said that
“national debt is the enemy of the left and the enemy of France”?
It is also the enemy of the United Kingdom.
Sheila Gilmore
National debt is sometimes essential. After all, I seem to recall that it was very much higher at the end of the second world war than it has been at any time since. There were reasons for that, and I believe we finished paying it down only a few years ago. Sometimes, we have debt because we have made essential or useful investment, and of course it is not the same as deficit.
Mr McKenzie
My hon. Friend is making a very good point. We have heard one of the comments of the new President of France, but does she think the Government will agree with his opposition to the austerity measures that have been put in place across Europe?
Sheila Gilmore
I do not dissent from my hon. Friend’s view. The new President’s general intention is indeed to break away from the fixation with austerity measures. That is not the same as saying that we do not want to deal with the deficit. The question is how to do that successfully and ultimately reduce borrowing.
The last Government have been misrepresented as having constantly increased the national debt. That is simply wrong. It was substantially reduced under the Labour Government, but what caused that process to go into reverse—I am not going to say it did not—was the recession and the economic stimulus that was put in to get us out of it. Our view remains that had the policies that were in force between 2008 and 2010 been continued, rather than going into a double-dip recession we would have begun to climb out of the recession.
Julie Hilling
Does my hon. Friend agree that we had growth in the British economy at the time of the general election, but we now have a recession made totally in Downing street? If the Government have such a big underspend, why on earth do we face a double-dip recession, and why are ordinary people suffering so much at their hands?
Madam Deputy Speaker (Dawn Primarolo)
Order. In replying to that intervention, I hope the hon. Lady returns to the subject of the debate, which is fuel duties.
Sheila Gilmore
I do not want to dissociate those things—they are linked in lots of ways. Initially, we were told that there were constraints on the Budget, including not postponing the increase in fuel duty. What happens in a few months’ time? The measure is a deferral—we are not forgetting about it for ever—but what financial complexities will that create?
It is heartening that the Government’s motivation seems to be their recognition that people are suffering from a general reduction in their standard of living. As many commentators have pointed out, many working families are experiencing real reductions in disposable incomes such that they have not experienced for many years. That is part of the serious position in which people find themselves. It is good that the Government have understood that and want to act on it, but I would like them to act on some of the other issues that Opposition Members have constantly raised. I want them to understand that people are suffering not just from fuel prices, but from a number of other measures. The Opposition’s five-point plan would have reduced VAT and enabled investment in job creation. Perhaps it is not too late even now for the Government to U-turn on that.
Simon Hughes (Bermondsey and Old Southwark) (LD)
I am happy to speak in the debate on new clause 1, which was moved by the Economic Secretary on behalf of the Government; on new clauses 9 and 11, which are in the name of the Labour Opposition team; and on new clause 8, which is in my name.
I support new clause 1. I am not against responsive government—indeed, there is a duty to be responsive in government. I therefore welcome the fact that the Chancellor announced that the Government had heard the concerns of ordinary people, families and businesses that cost of living pressures continue to be difficult on them. The cost of fuel at the pumps affects people in rural areas, but it also affects people in suburban and urban areas, and people running both small businesses and larger firms. For some people, there is an inescapable obligation to drive—they drive for their families and businesses, and in emergencies. Therefore, the price at the pump is a hugely important part of their weekly budget.
People made the case, and the Government, including Treasury Ministers from both parties, first agreed to delay the increase scheduled for earlier in the year until August, and last week announced a further delay until the end of the year. That is welcome. It is fair to say that the announcement came slightly out of the blue and yellow last week—it took a few people by surprise—but it clearly has not been met with opposition from those on the Opposition Benches, because a grand total of six Labour Members, including the Whip, have been present in the Chamber for this debate. There is clearly no great furore at this concession to the needs of the consumers.
Simon Hughes
No, I will not give way. The hon. Lady spoke for a very long time, as she often does, and I will not concede. This is a short debate—it goes on only until 7 o’clock—and I want to allow other colleagues to speak.
I want to make a specific plea on biodiesel. I should declare my interest: as some colleagues know, I sometimes drive a London taxi, which has often been powered by biodiesel bought from Uptown Oil, a firm in my constituency that collects used cooking oil from local firms—a chain of good environmental practice ends up in my cab and other vehicles in south London.
I have had discussions with the Economic Secretary and the Under-Secretary of State for Transport, my hon. Friend the Member for Lewes (Norman Baker), and I asked colleagues—my hon. Friends the Members for Bristol West (Stephen Williams) and for Redcar (Ian Swales)—to argue the case in Committee last week. We have so far not persuaded the Government to change policy, but I wanted to put the case as to why the industry needs continuing Government attention and to ask that they do not turn their back on the industry, even if they are not willing to concede to my requests now.
Cathy Jamieson
The amendment deals with an unfair situation that I mentioned earlier. People who are already earning considerable amounts, millionaires and others receiving the highest levels of pay, will benefit from the Government’s proposal to reduce their tax rate to 45%. We had a good debate on the subject on Second Reading, but were not able to discuss it in Committee. At that time we wanted the Government to reconsider, and not just because millionaires were set to receive something equivalent to a £40,000 per annum tax cut.
Sheila Gilmore
My hon. Friend may be interested to learn something that I myself learnt from a television programme that had no direct connection with economics. It was part of a series about London streets. A banker who was talking about his home in Portland road said that prices there had risen considerably since the taxpayer had bailed out the banks, and that far from suffering from the current financial situation, people seemed to be benefiting.
Madam Deputy Speaker (Dawn Primarolo)
Order. I must inform the hon. Member for Harlow (Robert Halfon) that only one Member should be standing on the Floor of the House at any one time. Welcome to the Opposition Benches, Mr Halfon.
Cathy Jamieson
I will answer that point in more detail later. I am a little disappointed, however, as I thought the hon. Gentleman was going to make a different point. He seems to be suggesting that only people with a connection to Labour had been avoiding or evading tax, which is, of course, absolutely not the case. I hope Members across the House will ensure that at every stage those who are due to pay their taxes should pay them and should do so willingly and properly.
Sheila Gilmore
What does my hon. Friend think about the fact that in Committee a Conservative MP, the hon. Member for North East Somerset (Jacob Rees-Mogg), said that in his opinion the actions of a certain Ken Livingstone were in fact very sensible?
Cathy Jamieson
I do not wish to return to the lengthy debate that took place in Committee, but we did at various times have discussions about people doing things that were perfectly legal—and which, if they were so advised, might make perfect sense—but the question then arises as to whether they are morally or ethically the right things to do.
Charlie Elphicke
It is a pleasure to follow the shadow Minister, who has set out such a partial view from the Labour party’s perspective on this Budget. I think there is a better approach: the more people we take out of tax, the better, as the administration cost is less and there is less hassle for people, particularly the least well-off. I want to see the personal allowance increased to £10,000 as soon as possible. Good progress was made in the last Budget, but the sooner we take the number to £10,000, by far and away the better. Nevertheless, I welcome the fact that most basic rate taxpayers will see an annual cash gain of £220, and I welcome the fact that this Budget takes 2 million people out of tax altogether. That is important, particularly given that we all remember the fiasco over the 10p tax rate. The more we can look after the least well-off and take them out of the tax system, by far and away the better.
I was fascinated by the whole discussion about the 50p rate. We can see from Treasury figures that we are talking about £100 million. That figure is rubbished by the Labour party, which thinks the figure is completely wrong and cites an IFS report. Let me quote the relevant passage from the IFS report, which is where I think the Labour party draws its approach from. The IFS states:
“The worry for the Chancellor is that the estimate that cutting the top rate to 45% will only cost £100 million is particularly uncertain. It assumes a ‘no behaviour change’ cost of £3 billion offset by a behavioural change of £2.9 billion. The first number we know reasonably accurately; the second number is estimated with great uncertainty. Even if we knew the effect of introducing the 50p rate—which we don’t with any precision—responses may not be symmetric. Those who have got a taste for avoiding the 50p rate may continue to avoid the 45p rate (even if they wouldn’t have done so had the 50p rate never existed). The experiment with the 50p rate does not appear to have gone well.”
My first conclusion is that the IFS is saying that making the rate 50p in the first place was a complete and utter disaster. The second issue raised is the uncertainty over behavioural change. On that, I say that we have empirical evidence on what happens when the rate is reduced. I do not know whether everyone recalls this, but we used to have an income tax rate of about 80%. When that was reduced, first to 60%, there were great cries from the Labour party that it would cause a collapse in the revenues, but instead the revenues rose. Why was that? It was because fewer people avoided tax. The Government of the day then reduced the rate to 40p. Again there were great cries from the Labour party that that would let the rich off the hook, but what happened? The revenues rose. Why was that? It was because fewer people were as interested in avoiding tax and they paid up a fair share.
Sheila Gilmore
There are other explanations for the increased tax take during the period in question. One was the general growth in the economy, which generated more income, whereas another was the greater degree of inequalities, which meant that although people were paying a lower rate of tax, the cash take was higher because their income had risen so much. People on very high incomes are still paying a relatively low rate of tax, however. If tax avoidance did not take place previously, why have there been so many examples of it?
Sheila Gilmore
I ask the hon. Gentleman to correct the impression he gave. The age-related tax allowance does not go to the very richest pensioners; it is the group in the middle who are being squeezed by the proposal.
Charlie Elphicke
The age-related tax allowances only kick in to benefit those pensioners who have a substantial income, or a more substantial income, in retirement. We are not talking about the very least well-off pensioners who are affected by grinding poverty, but about pensioners who are better off and who have savings and income. As I said, there are no cash losers and they have had a massive benefit from the pensions triple lock.
Barry Gardiner
The hon. Gentleman has already said once in the debate that he does not believe the Treasury’s figures. He has now reinforced that. The Treasury has made the calculations. He can choose to say, on a personal level, “I think the Red Book is a load of tosh,” but he cannot say that that is the Government’s position. The Government’s position is that the measure will cost £3 billion a year. [Hon. Members: “No, it is not.”] The Government cannot get out of this one. They say that it will cost money. That money will be taken away from some of the poorest people in our society to pay for it.
That is what people find so distasteful about the way the Government are behaving. They are taking away from some of the poorest in our society, yet feel that it is so important to send that signal out to some of the wealthiest. The people who are being excoriated in the public conversations around the country for what they have done and what they continue to do to our economy—those are the people who will benefit, and it is the poor in our constituencies who will suffer.
Sheila Gilmore
Did my hon. Friend spot the illogicality in the position of the hon. Member for Dover (Charlie Elphicke), who made an impassioned claim to be a scourge of tax avoiders, but is in effect endorsing tax avoidance by arguing that we have to reduce the rate of tax because so many people are trying to avoid it? Would it not be better to look at ways of preventing people from avoiding tax?
Barry Gardiner
My hon. Friend, yet again, makes an excellent point. There is an implicit acceptance that people will try to avoid tax, and that therefore it is better to reduce the level of taxation so that there is not the same level of avoidance.
Most of my constituents listening to this debate and to the debate that has been going on since the Budget think the Government do not understand what people are going through, what they are feeling and just how difficult it is for some of them to make ends meet. They do not understand that precisely because of the sort of signals the hon. Member for Dover just mentioned. The Government consider it more important to make those signals to the wealthy. They think it is more important to focus on what they understand about their involvement in society, and they do not give the same attention to getting those messages to the poor in society.
What the Government have done in the Budget is to say, “If you are poor, we know that the best thing for you is to cut your benefits to make sure that you work harder, and if you are rich, we know that the best thing for you is to cut your tax so that you work harder.” People look at that and say, “This doesn’t make sense. It’s one law for the rich and another law for the poor.”
Thomas Docherty
I often think that the Business Secretary would make an excellent contestant on “Strictly Come Dancing”, such is his fleetness of foot. In fact, I am sure that tomorrow morning there will be leaflets out in Brent and elsewhere condemning and disowning this Government policy, as if Liberal Democrat votes had not yet again carried the argument, leaving Ipswich Town footballers and others better off and our greatest generation worse off. This is a poverty of policy. It is the worst example of what happens when the quad sits up drinking and it will leave the country with a dreadful hangover.
Sheila Gilmore
The policy on the higher tax rate is, in effect, an endorsement of tax avoidance, which worries me greatly. Some of us sat through the Finance Bill Committee and heard Government Back-Bench Members say how much they disapproved of tax avoidance, but throughout this episode we have heard people argue that because some people have taken steps to avoid tax, we should reduce it. That is highly unsatisfactory to the many people who, on pay-as-you-earn, have little ability to avoid tax. They are gobsmacked by all this.
If part of the problem was due to people forestalling, which is the technical term, in the first year of the new tax, perhaps—and this is a thought for the future too—we should have introduced it with immediate effect, as happens with some other taxes. For example, tobacco duty is generally increased on the day of a Budget, so that people do not rush out to fill their shopping bags—or whatever they do. Perhaps that would have been a way around it. I know it is not traditionally done with increases in tax rates, but if that is how people respond to these things, perhaps we should treat higher earners like we treat people we think will fill their bags with cheap booze or cigarettes, and forestall them, rather than letting them forestall the rest of us—because that is what they are doing to the communities in which they live. Unfortunately, in a year’s time, we are likely to hear Government Members saying “We told you so” even more. The reduction has been postponed for a year, but it will still happen, and a lot of people will no doubt do the same thing in reverse when it does.
It has become something of a mantra to say that no money was ever raised from the 50p rate of tax, but that is not true: £1 billion was raised, even in the year in which people were apparently forestalling. If we had let it run for somewhat longer, the situation could have been even more different. However, as the Institute for Fiscal Studies pointed out, to rush to judgment on this matter so quickly, because that suited the way in which the Government wanted to go, was not justified. We are, in effect, saying to people that it is all right to avoid tax.
I started to tell a little story earlier, and I hope that it will be seen to be relevant. I am fascinated by history, and particularly by housing, and—unusually, for me—I watched a television programme last night. It was entitled “The Secret History of Our Streets”, and last night’s episode was about Portland road, in London. It had been made long before the current debate on the Budget. A young, brash banker got up and said that the value of the property on that street had gone up even further since the taxpayers had bailed out the banks. Did we really think, he asked, that the banks were going to start lending to small businesses? No, they were going to give people like him an increase in income so that they could pay even more for those houses. He might have been one of those boastful types, but that was nevertheless an insight into the mindset of the kind of people in our community who think that tax avoidance is absolutely legitimate. There is a great deal of wealth in this country, as that example showed, and many ordinary people find this whole debate offensive and difficult to swallow.
At the other end of the tax issue, we have the question of raising the tax-free allowances. The Government keep saying how kind they are being to people on low incomes, but we should remember that once those people have had their tax allowance raised, they will get no further advantage in subsequent years because they are already out of the income tax regime. Other people, however, have gained considerable advantages from the raising of the basic tax threshold. Many people on considerably higher earnings—although not necessarily paying higher rates of tax—have gained from the measure.
It has been easy—for the Liberal Democrats in particular, as this is one of their favourite lines—to say that raising the tax threshold is all about helping the very poorest. However, the very poorest were already outside the income tax regime, and people on considerably higher earnings—particularly two-earner families without children—have benefited substantially from the raising of the threshold. We must also take into account what people on the margins who have been taken out of tax have lost. When we look at the details, we see that as a result of the measure, they could lose tax credits and, in some cases, housing benefit. Their gain is therefore very much less than has been suggested.
Mr Kevan Jones (North Durham) (Lab)
A lot of the people my hon. Friend is describing are actually in work, and the Government seem to forget that a lot of low-paid workers get housing benefit and other benefits. Does she agree that it is those individuals who will be hit the hardest?
Sheila Gilmore
Indeed, people who are working and who are, or were, paying tax stand to lose considerable amounts, particularly in the light of the way in which the tax credit system has been eroded as part of this process.
There are those who say—again, this is one of those things that keeps getting repeated as if it were true—that the Labour Government were not bothered about getting people into work or making work pay, but the whole thrust of tax credits, including child care tax credits, was indeed to make work pay. What this Government have done, by reducing the amount that can be claimed for child care, by taking away tax credits and, most inappropriately in my opinion, by taking away tax credits from some of the lowest-paid couples because they are deemed not to be working enough hours, more than detracts from the gains made by raising the tax threshold. Being realistic, these poor people whom the Liberal Democrats think they are standing up for have, particularly if they have children, lost out because of the combined effect of the Government’s measures.
Sheila Gilmore
That may well be the case.
What we need to do is to find ways to invest in our economy that will genuinely benefit not just those who are unemployed, but those who are under-employed. The Government like to suggest that the rate of growth in the private sector has increased slightly in the last few months, but most of the jobs created over the last couple of years are part-time jobs. As a result of that, these very people are simultaneously losing tax credits and have to claim other benefits. The housing benefit bill has risen substantially in the last year, despite the Government’s changes, and that is because many people in part-time jobs are having to claim. What we saw in May, for example, was that the tax take had dropped and expenditure had risen, particularly on various kinds of welfare benefits.
Taken as a whole, this policy is simply not working. I would have greater respect for the Government if they were now saying, “We must look at why it is that some people are seeking to avoid the additional rate of tax. We must find ways—perhaps it is nudge, perhaps it is enforcement—to make them pay.” As others have said in this and previous debates, we seem to say to one group of people that if we take their benefits away they will work harder, while we say to another group of people that we have to give them more money through tax breaks so that they will work harder. It does not make a great deal of sense, and it is profoundly unfair.
Some of the differentials in our society now are huge. If the proportion—not necessarily the amount—of tax being paid by the top 1% of earners has risen, it might well be because their incomes have risen so much further than those of the rest of the community. The gap between the top earners and the rest has widened hugely over the last few years, which creates a profoundly unequal society.
Stephen Williams (Bristol West) (LD)
I have listened to a good deal of what the hon. Lady has said during our debates, and I have been trying to decide whether or not she supports the raising of the tax allowance. However, I want to ask her about the specific point that she made about the gap between the rich and the poor, which she said had widened over a “few years”. Surely she meant “over the last 13 years”.
Sheila Gilmore
As I think the hon. Gentleman knows fairly well, the increase in inequality began far earlier than that. The point in the history of the post-war United Kingdom when the equality gap was narrowest was 1979, which, interestingly, marked the end of a 20-year period during which Labour Governments had predominated. After 1979, the widening of the gap began and accelerated.
I would not suggest for a moment that the party of which I am a member did as much as I should have liked it to do when it was in government, but we did a great deal for pensioners and the least well-off workers in society by, for instance, getting single parents back to work and introducing the minimum wage. It is simply not true that we were not aware of the issues, or that we did nothing to tackle them. The hon. Gentleman may want to return to the heady days of 1979, and perhaps we should all want to do that. Now, however, inequality is breeding a society that poses many dangers, and we want to reduce that inequality, but I do not believe that the Budget does anything to reduce it. We know that the Budget will increase child poverty, and I believe that in three or four years the inequality gap will have widened even more.
Jacob Rees-Mogg
It is a real pleasure to follow the hon. Member for Edinburgh East (Sheila Gilmore), who made such an enormous contribution to the Public Bill Committee. She enlivened it regularly with her thoughts, with which I have almost invariably disagreed—and today is no exception.
We are now dealing with the best part of the Budget: the heart, soul and even the guts of it. We are doing some big and bold and important things, with which I shall deal in turn. One of them is tough and brave and noble. It is the proper aim of Government to take on difficult things which, although difficult, are right. But I shall start, instead—
Jacob Rees-Mogg
I am in entire agreement with my hon. Friend. We want to get people out of the tax and benefits system as much as possible so that they can stand on their own two feet. That is what people want.
Sheila Gilmore
The problem with the hon. Gentleman’s argument is that, even if the tax threshold is raised towards the median income, as he suggested, unless the minimum wage is raised substantially, many people’s earnings will be so low that they will still live in great poverty. That was why benefits such as tax credits were created. The other route might be to raise the minimum wage.
Jacob Rees-Mogg
Mr Deputy Speaker, you will rule me out of order if I argue that raising the minimum wage would be extremely unwise, so I would not dare to say it. However, on the point of benefits for the worst off, I am all in favour of those. It is a thoroughly good thing to help people who are just in the earning bracket, but not to give benefits to people earning £70,000 a year, paid for out of their extraordinarily high taxes.
Mr Gauke
No I cannot, but I know that, for example, the Arsenal manager remarked that the 50p rate put him at a disadvantage. Earlier, the hon. Gentleman mentioned Ipswich Town and whether its players deserved a tax cut or pensioners did, and I have to say that on last season’s performance one or two looked as if they could qualify for the age-related allowance, but that is not at the heart of my argument.
The point is that we have to be competitive, and we want to attract talent to the UK, but having a higher rate than France, Italy and Germany is not competitive.
Sheila Gilmore
Generally, when changes are made and we want to assess their impact, we carry out properly independent research. On the changes to housing benefit, for example, the university of Sheffield has been commissioned to produce reports, but what research into our short experience of the 50p tax rate was carried out that gives rise to the conclusions mentioned? Do we have some research that we can look at, or is there just speculation that people might have retired or might have gone to Switzerland?
Mr Gauke
The hon. Lady asks what research we have. I am holding it in my hand: the document produced by HMRC, which sets out a thorough analysis. I urge her to read it and to see that it is far from speculative; it is a thorough piece of work, which shows that as a result of the 50p rate total income fell by between £2.9 billion and £4.4 billion and GDP was between 0.2% and 0.3% lower. There has been not just a loss of tax revenue, but a loss to the whole economy through lower productivity and lower economic activity.