The Economy and Living Standards
Sheila Gilmore Excerpts(10 years, 6 months ago)
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Debbie Abrahams (Oldham East and Saddleworth) (Lab)
I found the reference in the Queen’s Speech to the Government continuing
“to build a stronger economy and a fairer society”
absolutely incredible. It assumes that we already have a stronger economy and a fairer society, and we patently do not. We have had the worst economic recovery in 100 years. After three years where the economy flatlined, the recovery is still very fragile. We need 1.6% growth each quarter to catch up to the growth we had at the end of 2010.
What is growth based on? Once again, we are seeing the start of a housing bubble, driven by the Government’s policies, and an increase in household debt, which was up to £2.9 billion in March this year. The Tories’ 2010 manifesto stated:
“A sustainable recovery must be driven by growth in exports”.
Absolutely. Who would disagree with that? But the Government have not enabled that to happen. The trade figures remain in the red—by £22.4 billion in quarter 4 last year, which is equivalent to 5.4% of GDP. By their own measures, the Government are failing. Related to that, UK productivity is the second lowest in the G7 and 20% lower than the G7 average. That is the widest gap since 1992 and reflects a massive fall in non-financial investment.
Small businesses, which I have been campaigning for and championing since I entered the House three years ago and which employ nearly half the work force, are still feeling the pinch. The Federation of Small Businesses survey shows that access to finance and late payments are still the two biggest issues, with £30.2 billion owed to them in late payments. Although I recognise that the Government have finally responded to the issues that my inquiry into late payments identified last year and taken up some of my recommendations, it is likely that the measures will relate only to the public sector. That is not good enough and does not go far enough. We need to ensure that the Government are standing up to big businesses and doing the right thing. If they do not, we will.
Then, of course, we had the Government’s arrogance about what they would do about public borrowing. They claimed that they would clear the deficit by 2015, but we are not even halfway there yet, and they are still borrowing £190 billion more than they planned.
Associated with the fragile recovery are the effects of unemployment and employment. The unemployment rate is above pre-recession levels, and employment rates are below pre-recession levels. I still have major issues with how the figures are distorted by the inappropriate sanctioning that is a policy in the Department for Work and Pensions.
Sheila Gilmore (Edinburgh East) (Lab)
Does my hon. Friend share my concern—it was one of the points I wanted to raise with the Chancellor when I was attempting to intervene on him—that more than 1 million people who are unemployed do not appear on the claimant count of which he is so proud? They represent more than 47% of the total number of the unemployed. There appears to be no knowledge of what is happening with these individuals and why they are finding it so difficult to get jobs. It clearly cannot be benefits dependency, because they are not on benefits.
Debbie Abrahams
Absolutely. My hon. Friend highlights another issue with how information on claimants and people not receiving payments is being missed. We should be doing as much as we can to expose those issues.
I mentioned the employment rate still being below pre-recession levels. The jobs that have been created since 2010 tend to be insecure, part time, low paid and on zero-hours contracts. The number of people on short-term contracts has increased twentyfold since 2010 to 1.65 million, 655,000 of them involuntary. Increases in the number of temporary jobs account for more than half the rise in employment. Nearly one in five, or 1.46 million people, work part time because they cannot get full-time work. That is the highest underemployment since 1992. Four out of five new jobs, and one in three of those in Oldham, pay below the living wage.
Another issue is the geographical spread of the so-called recovery. Since 2010, 79% of new jobs have been created in London, with another 10% in nine urban centres outside London.
In the limited time available, I want to talk about the inequalities this Government are presiding over. All those employment and unemployment effects are happening at a time when the Government have made specific policy decisions on increasing the top rate of tax for people with incomes of more £150,000, but average wages are down £1,600 a year. The analysis by the Institute for Fiscal Studies shows that the net effect of tax and benefit changes for an average family is a loss of more than £900 since 2010, while bank bonuses have soared by 83% and top-to-bottom pay ratios in the FTSE 100 stand at 300:1.
We are already seeing the impact in access to food banks: this week’s Oxfam report, “Below the Breadline”, shows that 20,247,042 meals were given to people in food poverty in 2013-14 by the three main food aid providers—a 54% increase on 2012. Another recent Oxfam report, “A Tale of Two Britains”, highlighted the growing gap between rich and poor, with five of the richest families in the UK wealthier than the bottom 20%, or 12.6 million. That follows a raft of other reports—for example, from the Equality Trust.
The gap matters—it really does. It matters because, as overwhelming evidence shows, society as a whole benefits from being fairer and more equal in areas ranging from life expectancy and mental health to educational attainment, social cohesion and social mobility. It is worrying that we are seeing further increases in premature deaths in deprived areas compared with more affluent ones. According to a report published in May, people in Manchester are twice as likely to die early as people in Wokingham, yet as I mentioned in Prime Minister’s questions yesterday, last December the Government scrapped the health inequalities formula that Labour introduced in office to ensure that NHS resources were allocated according to need, and which the analysis proves has been effective.
A fairer, more equal society also benefits our economy. Again, there is overwhelming evidence from a range of sources that inequality causes financial instability, undermines productivity and retards growth.
Sheila Gilmore (Edinburgh East) (Lab)
It is not at all surprising that Government Members want to talk about the “long-term” economic plan, because that diverts attention from the failure of the short-term, one-Parliament economic plan that we were told about extensively in 2010 and 2011, which they said justified many of the measures taken. Interestingly, it is clear from some of the contributions we have heard since last week, particularly the contribution from the hon. Member for South West Bedfordshire (Andrew Selous), that such economic growth that we have managed to see over the past year appears to have been stimulated by public investment. He talked about railways and a bypass. That sounds like a Labour policy: public investment to create private sector jobs. Actually, it is our economic plan that is being successful.
Does it matter whose economic plans did or did not work? Many people would say, “Oh, get on with it. We have to move forward.” But it is important, and in two particular ways. One way has to do with the fragility that still exists in the economy. I want to mention an issue I raised in an earlier intervention: the growing gap between the unemployment rate and the claimant count. When Government Members talk about falling unemployment in their constituencies, they are actually talking about the claimant count. When they greet anything Opposition Members say with, “By the way, the hon. Member should be aware that unemployment in her constituency has gone down by 20%”, they are talking about the claimant count. Some 47% of those who are unemployed are not in receipt of jobseeker’s allowance. That is 1 million people.
What is happening to those people and to the economy within which this is taking place? A lot of them clearly cannot get jobs, which suggests that this great recovery is not as healthy as the Government claim. Perhaps it differs by geographic area. From the point of view of the economy, this is particularly important, but it is also particularly important for the individuals involved—we must never forget that. Some of them will have a working partner, although not necessarily a very well-off one. They need only relatively small part-time earnings to lose jobseeker’s allowance after six months, because after that they will not qualify for the income-related benefit. Remember that that household has already lost one income, due to losing one of its two jobs, so it has a much reduced income and then it loses £72 a week in jobseeker’s allowance. That household’s buying power and standard of living has dropped catastrophically. What is happening to those people?
Some of those people are in an even more vulnerable position. I will illustrate that with the case of a constituent who came to me who had no income because he had been sanctioned for six months having been declared fit for work. He has a learning disability of a considerable nature and could not cope with the conditionality of jobseeker’s allowance. He just gave up and stopped claiming because he could not cope with it any longer. He was being supported by his parents, who were living on retirement pensions. How many more people are there who have just dropped through the so-called safety net? I think that the Government should be worrying about that, because of what it is telling us both about our economy and about individual cases. I would like the Government to look into that with some urgency.
Oral Answers to Questions
Sheila Gilmore Excerpts(10 years, 7 months ago)
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Danny Alexander
That is a very good question. My hon. Friend and I are both very proud of reaching the £10,000 tax-free allowance goal that the Liberal Democrats set in our election manifesto. Our increases in the tax-free allowance total more than £3,000, which is considerably more than the width of the former 10p starting rate band and is, of course, a 0% band. In that sense, it is literally twice as good as the previous policy.
Sheila Gilmore (Edinburgh East) (Lab)
For the 17% of wage earners who are already below the income tax threshold, much of what has been said is not of much help. Will the Chief Secretary directly commit to helping low-paid families with child care costs by reinstating the 80% level rather than the 70% level, which he introduced, so that people in that category can begin to gain rather than simply stand still or become worse off?
Danny Alexander
I am sure that if the hon. Lady had had longer, she would have welcomed today’s growth figures and the jobs and employment opportunities that that has created for people right across the United Kingdom, particularly in Scotland. The 3.2 million people that the hon. Lady mentions have already been taken out of tax by the actions of this coalition Government—something that she did not welcome. Of course, the extra opportunities to increase their time in work also helps those individuals. We are increasing our support for child care, with the Government providing free hours, extending support under universal credit and introducing tax-free child care, too. This Government have done far more than any previous Government to help working people with children get back into work.
Finance (No. 2) Bill
Sheila Gilmore Excerpts(10 years, 8 months ago)
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Sheila Gilmore (Edinburgh East) (Lab)
My hon. Friend will have attended previous debates on this issue. Indeed, only yesterday in the Chamber, lectures were being given by Government Members about the need to simplify the tax code. Does she not find surprising the support for measures such as the one that we are debating today?
Catherine McKinnell
Indeed. Government Members often lament red tape and the complexity of the tax system. I am not entirely sure that they will be thanked for adding to it in this way and putting the burden of implementation on employers.
The apparent onus on taxpayers proactively to apply for this allowance is a concern that has been raised more widely. The Low Incomes Tax Reform Group has pressed the Government to ensure that a claim for the marriage tax allowance can
“be made on paper, as well as online; digital exclusion affects disproportionately people on low incomes, the very people to whom this relief is directed. It is particularly important that a paper copy is available since, in some cases, taxpayers will seek assistance from the voluntary and charitable sector with, perhaps, only one spouse being physically present at such meetings.”
LITRG goes on to urge that
“the claim/election process will be made as simple as possible—preferably a joint election rather than separate claim and election.”
I look forward to the Minister’s response to those concerns.
The complexity of the Government’s marriage tax allowance proposal has been commented on by the IFS, which stated, when the measure was first announced:
“One striking feature of the policy is that it complicates the income tax system. A transferable personal allowance for married couples capped at £1,000 and then withdrawn using a cliff-edge at the higher-rate threshold is not the simplest to understand. It is three years since another cliff-edge at the higher rate threshold was announced at the 2010 Conservative Party conference as a way of effectively means-testing Child Benefit, only to be removed and replaced with a less egregious taper at Budget 2012. The amounts involved here are less than in that case, which perhaps explains the willingness to cliff-edge again rather than implement a taper. Nevertheless, it is difficult to escape the conclusion that an income tax system which makes some people worse off after a pay rise has something wrong with it.”
One might think that, as my hon. Friend the Member for Edinburgh East (Sheila Gilmore) pointed out, a Government who have so boasted about being committed to tax simplification would want to avoid further complicating the system. At the launch of the Office of Tax Simplification, the Chancellor commented:
“A decade of meddling and intervening has made the tax affairs of millions of families and businesses across the UK extremely complicated. We need to sort out this mess.”
What does the Office of Tax Simplification make of the marriage tax allowance, which will clearly make the tax affairs of couples and employers more complex? We do not know because, in the words of the Exchequer Secretary in response to a written question I tabled:
“The Office of Tax Simplification (OTS) has not made an assessment of the proposals for a transferable tax allowance.”—[Official Report, 12 February 2014; Vol. 575, c. 642W.]
Why on earth not? What could Ministers possibly fear from the outcome of such an assessment?
It may be clear now that the Opposition oppose the Government’s marriage tax allowance and will vote against clause 11. We believe that the marriage tax allowance is perverse and unfair. It is a poorly targeted use of resources and is overly complex, and our amendment to clause 11 presses the Government to undertake a proper review of the cost, the impact and the benefits for those who will receive it and for the overwhelming majority of married couples and families who will not benefit at all.
Amendment 3 calls on the Government to ensure that any such review includes an assessment of alternative tax reliefs that would benefit a much greater number of families, because we are not just opposing the marriage tax allowance today. Indeed, we have said that a future Labour Government would scrap this policy and use the money saved, together with funding from a mansion tax on properties worth over £2 million, to reintroduce the 10p starting rate of tax, meaning a tax cut for 24 million people on low and middle incomes, by contrast with the 4.2 million couples who will benefit from the marriage tax allowance. Crucially, almost half of those benefiting from a new 10p tax rate would be women.
We know that the Liberal Democrats are apparently implacably opposed to the policy introduced by clause 11 and secured a deal in the coalition agreement to go so far as to abstain on the measure. I believe it was before the 2010 general election that the now Deputy Prime Minister described the Conservatives’ proposal for a transferable tax allowance for married couples as
“patronising drivel that belongs in the Edwardian age.”
I know that Liberal Democrats have, as some might say, an irritating habit of saying one thing before a general election, then doing precisely the opposite—university tuition fees and the VAT bombshell spring to mind—or of saying one thing at any point in the electoral cycle and doing precisely the opposite: for example, 46 Lib Dem peers voted to retain the bedroom tax just 24 hours after their party president, the hon. Member for Westmorland and Lonsdale (Tim Farron), said it was something his party could not “continue to support”. Although the Liberal Democrats may be thinking about abstaining on clause 11 as it stands, it is difficult to see how they could sit on their hands this afternoon and vote against our reasonable amendment.
We know that the Lib Dems apparently secured the policy of free school meals for every child in reception, year 1 and year 2 from September 2014, reportedly in exchange for agreeing to abstain on the marriage tax allowance. We of course back the policy, having piloted the idea in government in County Durham and Newham, with excellent results, but there are very real concerns about the way in which the policy was announced, and how it will be implemented. The initial pledge was for a “hot, nutritious meal at lunchtime”, but that is now being described as an aspiration. Ministers are now simply referring to a free, nutritious school lunch.
Many thousands of schools across the country simply do not have the facilities to ensure this provision. The Liberal Democrats have stated that around £80 million of the additional £150 million capital funding required for the project will come from an underspend in the Department for Education and an additional £70 million would be new money from the Treasury. [Interruption.]
I hear hon. Members on the Government Benches chuntering from a sedentary position. They seem very disturbed by the Liberal Democrat policy of free school meals and do not see how it is linked to the marriage tax allowance. Would they like to confirm that that was not an agreement, as has been reported?
Mr Jackson
I do not think we all attend Christmas parties or cycle. [Interruption.] The more serious point, which I will elucidate further if the hon. Gentleman will generously allow me, is that there is demonstrable evidence that the institution of marriage has a positive net impact on society, cumulatively, particularly on children. There is nothing ignoble about using the tax system in a mature democracy to support behaviour that is good for society overall.
Mr Jackson
Not at the moment. I know the hon. Lady is very keen, and I am sure she will try to get in later.
Given the scale of the public benefits associated with marriage, it is not at all surprising that most people in the developed world live in countries that recognise marriage, as I said earlier in an intervention. There are numerous examples of this benefit that I could highlight, but given the constraints on time I will mention just a few. Regardless of socio-economic status and education, cohabiting couples are between two and two and a half times more likely to break up than equivalent married couples. Women and children are significantly more vulnerable to violence and neglect in cohabiting, rather than married, families. Three quarters of family breakdown in families with children under five comes from the separation of non-married parents. Children are 60% more likely to have contact with separated fathers if the parents were married. Separated fathers are more likely to contribute to their child’s maintenance if the parents were married. Growing up with married parents is associated with better physical health in adulthood and increased longevity. Children from broken homes are nine times more likely to become young offenders, accounting for 70% of all young offenders.
Mr Jackson
I will not take issue with the hon. Lady’s intervention, because it is quite sensible. Nevertheless, the evidence-based data in support of marriage in the tax system have been accumulated over a very long period and are very clear. It is incumbent on the Government not to disregard that evidence, but to take account of it in formulating their fiscal policies.
The list goes on and the findings are put in context by the fact that the Relationships Foundation calculates that the costs of family breakdown amount to £44 billion per annum and that family breakdown outside marriage is the real driver. As the Centre for Social Justice has demonstrated, of every £7 spent as a result of the breakdown of young families, £1 is spent on divorce, £4 on unmarried dual-registered parents who separate, and £2 on sole-registered parents. That is why the Prime Minister was absolutely right to say in response to a question about how the policy could reduce the deficit:
“If we are going to get control of public spending in the long term in this country, we should target the causes of higher spending, one of which is family breakdown. We should do far more to recognise the importance of families, commitment and marriage”.—[Official Report, 2 June 2010; Vol. 510, c. 429.]
I am aware of the arguments that the relationship between marriage and better policy outcomes is merely a coincidence and that the real driver for those better outcomes has nothing to do with marriage and is based on other considerations, especially income. Those arguments simply do not make sense. Apart from anything else, the fact that the millennium cohort study demonstrates that the poorest 20% of married couples are more stable than all but the richest 20% of cohabiting couples makes it plain that marriage is a significant, independent determinant of stability.
Sheila Gilmore
Will the hon. Gentleman consider the involvement of other variables? For example, those who are married are likely to be together for longer than those who are not and who split up, and the length of the relationship is likely to contribute to the stability of the children and their relationship with their parents.
Mr Jackson
I accept that, which is why I think it is unbecoming to focus on £3.85. We are not arguing that this is merely an issue of monetary transaction. It is about accepting that the inherent benefits of marriage are good for the individuals involved and, principally, their children, as well as for families, communities and society as a whole. We have the evidence.
Mr Jackson
I will give way later, because I am sure the hon. Lady will not forget my comments.
The purpose of clause 11 is not to try to make people get married, but to remove the obstacles to those who wish to marry, which is different. Marriage should at the absolute minimum be a credible, accessible option for all eligible couples. However, the failure of our income tax system—unlike that accessed by the majority of people living in Europe—to recognise marriage means that the fiscal obstacle to marriage is a real concern. The size of the couple penalty in this country, as outlined by the Institute for Fiscal Studies, is deeply worrying.
Mr Burrowes
My hon. Friend is quite right. We are simply talking about justice. The Government need to take a lead in this area. The culture can change in many ways, but one way we can take a lead is through the introduction of a small financial instrument to recognise marriage in the tax system. That is what we are doing today, and it will help to bring about a change of character across the whole country.
Sheila Gilmore
For many poorer couples who are living together, whether they are married or not, the benefits system does indeed have a couples penalty. Would the hon. Gentleman be interested in campaigning to end that?
Mr Burrowes
If the hon. Lady looks at the Conservative party manifesto, she will see in it a recognition of the couples penalty. Sadly, there was no money left by the previous Government, but we want to do a great deal to correct that legacy of injustice that they left us. The couples penalty is one example among many. The discrimination is increasingly happening among couples with children, and the transferrable allowance will at least start to right those wrongs.
I am keen to give the House the opinions of others as well as my own. The Institute for Fiscal Studies has clearly demonstrated that the transferrable allowance is progressive, so I invite all those who support progressive policies to join us in the Lobby when we vote on this measure. It was suggested earlier that we are taking a partial view in relation to the IFS, but I understand that about 70% of the benefit will go to those in the lower half of the income distribution. I am not sure whether anyone has yet corrected the comments from the IFS. Anyone who is concerned about family responsibilities should also recognise that this measure does something that has not been done for 15 years—namely, recognising family responsibilities in the tax system.
This is an issue of trust, certainly for the Conservatives, who put this measure in their manifesto and who want to retain the trust of the electorate. This is a vital first step, albeit moderate, towards fulfilling that manifesto commitment. We will also seek to give further recognition to marriage in an increased transferable allowance. We are fulfilling our vow to the electorate, however. At the election, people will look back at this debate and see that the Opposition were not supporting marriage. The electorate will remember that. I urge all Members to support marriage.
Dr Coffey
They certainly do. This measure is a start. We do not have tons of money, and the fact that resources are scarce has been well pointed out. Nevertheless, we are doing things that reduce the income inequality for families across the country, using the long-term economic plan. It has meant that gilt rates have been able to stay relatively low, which means that mortgage rates have stayed low and that is probably doing more for people than anything else, along with our fuel duty freezes and indeed cuts in previous Budgets. Those kinds of things are helping families, be they married or not.
I appreciate that time is short and others are waiting to speak, Mr Caton. I just wish firmly to say that although I am a singleton—I thought I had met Mr Right 20 years ago, but it did not work out—I hope that every married couple benefiting from this will recognise that at least they can go and have a nice wedding anniversary with a little bit more cash from the Government.
Sheila Gilmore
We hear so much in this House about how little money there is and how hard it is, yet certain members of the Government support this measure. It appears that not all do—the Lib Dem part of the coalition may or may not support it; it said it did not previously. We are talking about only a small amount of money, but let us see what it is equivalent to. Many people in this country have been outraged by the Government’s bedroom tax. Even if that makes the savings the Government claim it will, which I doubt, it will save less than the amount this measure will pay out. That is the problem: the Government say that the issue that has to be addressed all the time is saving money, but clearly when it comes to some things saving money is not quite so important. There are priorities, and the Government have chosen to make this policy one of them.
I believe we should be giving particular help to families with children, and not just to couples because they happen to be married. Apart from in respect of the very poorest, I have not noticed any great appetite to do away with the couple penalty that probably does apply in terms of people in the benefits system. But if two people choose to marry, we have an independent taxation system here and they can choose to work or not work, so I do not see where any great penalty is being applied to marriage. For those who have children the situation may be different.
If the Government wanted specifically to help parents who are staying at home with children, perhaps that is what they should have done. This measure does not do that; it helps couples where one person is not working, but it has no relationship with the needs of any children they may be raising. If our main aim is to help people with children and make sure that children are brought up in stable relationships, I cannot see what this measure has to do with that. The reason many relationships break down, whether or not they are marriages, has to do with financial insecurity and the difficulties that causes. Those struggling through a cost of living crisis and those who have lost out because of many of this Government’s policies particularly include the low paid. We can all pick and mix our experts—some hon. Members have cited views of the Institute for Fiscal Studies—but if we really want to help low-paid people, we must examine things such as the proposed tapering for universal credit. We need to examine the structure in place for working people who will be in receipt of universal credit—the replacement for tax credits. Under the current structure there is a serious lack of support for second earners in the family who want to start building up their earnings. We could be looking at such things, including child care help for low-paid families.
Very briefly, let me tackle something that was mentioned by the hon. Member for Peterborough (Mr Jackson). He did not take my intervention, so I will deal with it now, and, as he raised the matter, it must be relevant to this debate. One statement that Government Members are always keen to make is that every Labour Government leave office with unemployment higher than when they arrived, but it is not true. In 1946 unemployment was 2%, and in 1951 it was 1.3%. In 1951, at the beginning of the Tory Government, unemployment was 1.3%, and in 1964 it was 1.7%, so it went up under a Tory Government. Between 1979 and 1997, which was again a Conservative Government, unemployment went up from 5.2% at the beginning to 7.4% at the end, but for 13 of those 18 years, unemployment was above 10%. Therefore, the statement is not true, and it also completely distorts the appalling unemployment record of the Government between 1979 and 1997. I will now sit down and allow others to speak.
The Temporary Chair (Martin Caton)
Order. I wish to call the Minister by 3.45 pm at the latest, so I ask the hon. Member for Gainsborough (Sir Edward Leigh) to ensure that he has sat down by then.
Finance (No.2) Bill
Sheila Gilmore Excerpts(10 years, 8 months ago)
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Mr Redwood
I do not accept that at all, because the revenue in the previous year was very similar to the figure for the year before that, which was before people knew that there might be a cut in the tax rate. I suspect that next year will also see good levels of revenue. I do not expect a sudden reduction of £9 billion in revenue in the financial year we are just starting. As always, the hon. Gentleman is peddling misery for no good reason. Labour Members should rejoice and accept the fact that if we cut a rate, we sometimes get more money. They always want to spend other people’s money, so surely they should listen to how we can maximise the amount we get out of people.
Sheila Gilmore (Edinburgh East) (Lab)
Will the right hon. Gentleman explain where, following the rate change, this money has suddenly come from if it is not re-phased income? Is he suggesting that people have somehow avoided tax or that people have suddenly come into this country to pay it? He must have some reason for the increase, if he does not accept the one given by my hon. Friend the Member for Edmonton (Mr Love).
Mr Redwood
We are talking about people who are a serious amount richer than any of us on MPs’ salaries, and if the hon. Lady meets such people occasionally she will discover that they have many more freedoms than other people on when and where they earn income, what they invest in and where they organise their affairs. Some of them were not in this country before and came here when the rate was lowered. Some have some money in one country and some in another, and they can quite legally shift their money around and decide where they are going to earn more income. That is what companies do, as she has discovered and sometimes complained about. Rich people have a lot of flexibility, which means that a country that sets sensible tax rates attracts and keeps more of them and gets them to do more things.
There is also a disincentive effect, because someone who is legally here and keeps all their money here might not do extra work—why should they, when they are going to be taxed at too high a rate? Or they might not take an extra risk with their investments—why should they? If it works they will get taxed, and if it does not work they will take 100% of the loss. We can therefore change the climate by setting a competitive rate to encourage more confidence and action.
Nigel Mills
I am sure my hon. Friend’s maths are absolutely right.
If we are to review taxes and rates, I am intrigued by the idea of having, as my right hon. Friend the Member for Wokingham (Mr Redwood) said, a wide-ranging dynamic assessment of tax rates. Let us have a look and work out exactly the right rates for various taxes. Are we in the right place, or are we throwing away revenue and destroying business activity by having certain rates in the wrong place? I would like to understand the impact on small businesses of the jobs tax or employees’ national insurance. I would be keen to know the impact of fuel duty rates and of the tax on energy bills. I suspect those measures are doing far more damage to our small businesses, and the number of jobs they can support, than other things. A wide-ranging study of the impact of tax on small business could be an interesting exercise and could direct the way forward for policy. I suspect that it would not go in the area the Opposition want. They seem to want an expensive hike in the indirect taxes on manufacturing that do so much damage.
We ought to welcome people moving in the right direction. In 13 years in government, Labour favoured property taxes via the council tax. They hiked it up thinking that people would not notice. It is intriguing that they have now realised that it is extremely unpopular for those taxes to get too high, and that perhaps it is easier to try to focus on direct tax rates.
In conclusion, the Opposition amendment is in many ways a complete waste of our time. It is absolutely right to get the corporation tax rate down to 20%. I suspect that that is the end of that journey and then we can look at various other measures to support small businesses. Reducing the main rate down to 20% will not stop our support for small businesses. Let us get on and do it: it is the right thing to do.
Sheila Gilmore
For those who have already made the decision that they want to reduce corporation tax in this way, it is easy to characterise the debate as one group of businesses being pitted against another. The debate has to be taken in context. On the basis of that argument, it would be very difficult to suggest any changes, because somebody would always be able to say, “Ah, but you are pitting one group against another.”
We hear a lot of warm words about small businesses in this House. We are told frequently that they will be the driver of the economy and that the economic recovery depends on them. It is therefore disappointing for this proposal to be so quickly dismissed as irrelevant or inappropriate. If the amendment asked for it to happen without further review, Government Members would no doubt be telling us that we should not make such suggestions without looking at the impact. If we ask for a review to look at the impact they will tell us, “Well, that’s no good; you should just be doing it if you really believe in it,” rather than engaging with the issue.
Small businesses find that business rates are a large element of their costs, particularly when setting up and trying to get their businesses off the ground. A constituent of mine, with a friend, was setting up a fitness business—a very competitive market—from scratch, with a particular appeal to women. They called themselves “Fitness Chicks”. I thought that that might perhaps put off older women, but nevertheless they had a real ambition to get the business off the ground. They said that rates were the biggest thing holding them back as they were setting the business up.
Charlie Elphicke (Dover) (Con)
Small businesses do not tend to pay so much in corporation tax. That is not the main burden they suffer—that is the burden of business rates and payroll taxes. Will the hon. Lady therefore join me in welcoming the action that the Government have taken on business rates and payroll taxes, which will really help small businesses?
Sheila Gilmore
I am glad that the hon. Gentleman is interested in business rates, the subject we are discussing. Our suggestion is that in order to make a real difference to those businesses, we can go far further in the way we deal with business rates.
Rather dramatic statements are made that a suggested change of 1% in the rate of corporation tax will result in companies—on the basis of that alone—changing their plans, leaving the country or not coming here. These statements are made but it is not clear whether there is evidence for them. The impact of the 21% to 20% change in corporation tax is not—or so it would appear in the initial period at least, according to the OBR report—to increase take from corporation tax, but to decrease it.
Angie Bray
Does the hon. Lady agree that there is some certainty on business rates because we have the cap of 2% and a reduction in costs for those with rateable values under £50,000? That is something of which businesses can be certain. In the meantime, we need to make sure that larger companies can be certain of the tax regime in this country. Having a review will only create uncertainty, which is the one thing that businesses looking to invest really do not like.
Sheila Gilmore
We must review constantly what we do to get it right. The suggestion is that a review in itself causes uncertainty, but there are many uncertainties in business. The constant discussion about the EU, Britain’s place in it and whether there should or should not be a referendum is an uncertainty. I am sure that many people who feel strongly about that nevertheless feel it is so important that they are willing to risk that level of uncertainty.
Mr Redwood
The Labour Front-Bench team made a great deal of the need for banks to lend more money to small businesses being crucial to their future. How would an increase in the corporation tax rate and a special bank levy on payroll help? Would not that mean that the banks had less money to lend?
Sheila Gilmore
We still see high levels of remuneration and bonuses at banks while small businesses are told that there is no money to lend. Sometimes, of course, we are told the opposite is the case: banks allege that it is not a lack of money, but that businesses are not coming forward and do not want to expand. For a lot of small businesses who want to borrow, it is galling to find that banks are still seemingly able—despite all the difficulties they allege they have—to pay out so much in bonus payments.
To review these matters and to make a genuine attempt to provide additional help for the small businesses we all say we want to help would be useful. The terms of the amendment would enable us to get details of the impact of the cut in corporation tax to see exactly what the impact has been and what the impact of the suggested minor and very small increase might be before a decision is made.
Tom Blenkinsop
Does my hon. Friend agree that it is interesting that Conservative Members are talking about a 20% rate of corporation tax, which is a direct tax on profit, but have no qualms about how a review might interplay with things such as value added tax, which many, if not all, small businesses pay and is paid prior to profit?
Sheila Gilmore
Value added tax has been a difficulty for a lot of individuals and for small businesses. The amendment is an opportunity for us to review these matters. If Conservative Members are right that such a change would be harmful, a review would show that. It has to be demonstrated to the small businesses of this country why a proposal of this kind is thought to be harmful to our economy.
Mr Gauke
It is a great pleasure to serve under your chairmanship, Ms Clark, and to respond to the first of what will no doubt be many detailed debates over the course of this year’s Finance Bill. It may be helpful if I set out a little context as to what the Government have done in terms of corporation tax.
When we came to office in 2010, the main rate of corporation tax was 28%, and the small profits rate was 21% but was due to rise, under the plans of the previous Government, to 22%. In 2010, we set out the corporate tax road map. We set out our ambition to give the UK the most competitive tax regime in the G20. We wanted a corporation tax system that would support, not hinder, growth and would boost investment to support the economic recovery, so we reversed the previous Government's planned increase in the small profits rate and cut it to 20%, and embarked on the biggest reduction in the main rate of corporation tax since the 1980s. Last week, the rate was cut to 21%. Next year it will fall to 20%— the joint lowest rate in the G20.
Sheila Gilmore
I do not think that the Minister has yet addressed the lack of balance in the growth that is being shown, and the concern that has been expressed about that by the IMF and others. If policies such as the reduction in corporation tax were intended to boost manufacturing and exports, I should like to know why that still does not appear to be happening to the degree that would convince people that this is a balanced recovery.
Mr Gauke
As a result of our corporation tax reforms, businesses are moving their headquarters here. The north-east of England, for instance, has benefited from Hitachi’s investment. However, if the hon. Lady’s point is that the job has not yet been done and that further steps are needed to make our economy more productive and competitive, I entirely agree with her. That is why we must stick to the long-term economic plan.
Ian Swales
It is a privilege to serve under your chairmanship, Ms Clark.
I represent areas that, I am sure, are not dissimilar to those of Members who have already spoken and intervened and where there is a great deal of deprivation. Anybody who wants to learn about my constituency can look at the long article about it in the business section of last weekend’s edition of The Sunday Times.
The amendments tabled by Opposition Members forget some important things. The Labour party kept the top rate at 40% throughout its time in office, until its very last day in power. The only day the rate was 50% was 6 April 2010—the day Parliament was dissolved for the general election.
The right hon. Member for Wokingham (Mr Redwood) and the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) have both questioned how principled the former Prime Minister and the former Chancellor, the right hon. Members for Kirkcaldy and Cowdenbeath (Mr Brown) and for Edinburgh South West (Mr Darling), were in their commitment to raising the rate to 50%. One thing is for sure: a general election was approaching and they probably knew that the increase would be the gift that kept on giving in terms of headlines. They had levied taxes in any way they could and they knew that going up from 40% was a dubious move in terms of raising revenue; otherwise, they would have done it earlier. What it did do was lead to more headlines.
Millionaires are paying £381,000 more in income tax in this Parliament than they did in the previous Parliament. Having said that, cutting the rate was not the top priority for me or my party. Our priority was to cut taxes for ordinary working people and we are very proud of the large moves we have made in that direction.
We should also remember that taxing the rich is not only about the headline rate of income tax. Let us consider some of the other measures this Government have already taken. Withdrawal of the personal allowance on incomes of more than £100,000 means that there is already a 60% tax rate on incomes between £100,000 and £120,000. On capital gains tax, anybody lucky enough to make a capital gain of £1 million will pay £100,000 more tax under this Government than they did under the previous Government. The 18% rate of capital gains tax under Labour meant that City operators who made capital gains paid less tax on them than their office cleaners paid on their income, which was truly outrageous. People with a pension contribution of £250,000 are now paying £94,000 more tax on it. If anyone is lucky enough to have £1 million to spend after all those taxes, they will pay £25,000 more in VAT, if they spend it on standard rate items. Tax avoidance has also gone down; Her Majesty’s Revenue and Customs, with its extra resources, is clamping down on it. The idea that this Government are sitting around allowing the rich to do whatever they want is absolute nonsense.
Labour’s proposal to put the rate back up to 50% has already been thrown into doubt by the Institute for Fiscal Studies. I am the first to admit that £100 million is a lot of money, but that is all that would come out of it and the IFS has said that it is not a good way to narrow the deficit. HMRC has already said that what the rise to 50% would actually achieve is doubtful. If hon. Members want to review it, we already have real experience of rates of 40%, 50% and now 45%. The Treasury and HMRC conduct regular reviews and a similar review could be conducted on real, existing data. There was a 50% rate for a period, so a real review could be conducted. It is also worth remembering that national insurance is currently 2%, so the marginal rates that people are paying to the Government are not 45%, but 47%.
We have to be careful. The experience in France is fascinating. There has been a wholesale exodus, with the actor Gérard Depardieu taking the extreme step of moving to Russia to avoid what he regards as extreme tax rates. There is no doubt that people with such incomes and that kind of money can, largely, live wherever they like these days. We need to bear it in mind that the population is more fluid than it used to be.
The Red Book makes it very clear that the top decile pays far more tax than it did. That is right because, as the hon. Member for Carmarthen East and Dinefwr said, people with the broadest shoulders should bear the biggest burden; and they are doing so, because of all the changes that have been made. Despite the fact that the amendment suggests otherwise,
“income inequality is at its lowest level since 1986”,
as the Red Book states. I find the idea that income inequality widened under a Labour Government abhorrent, because such Governments should have narrowing it in their DNA. My four grandparents, who all helped to launch the Labour party, must have been spinning in their graves during the 13 years of the previous Government. I am deeply cynical about Labour’s commitment: they cut taxes for millionaires every year that they were in government.
I look forward to discussing this further in Committee. I do not have a particular argument with reviews, but they do not need to be specified in Bills.
Sheila Gilmore
We touched on this issue in the earlier debate. The right hon. Member for Wokingham (Mr Redwood), who is no longer in his place, told me that I probably did not mix with many very rich people, which I suspect is probably true. My whole life and the constituency I represent have not been chock-full of people living in millionaires’ row and having lots of money in their pockets. However, his points, which other hon. Members have mentioned, about whether the recent rate changes—from 40% to 50% and back to 45%—are a good test do not bear much weight. It is quite clear, in such a short space of time that people, could rearrange their affairs in various ways first to forestall the income and then to ensure that the tax due in previous years was paid last year.
The Office for Budget Responsibility has said the same—that there has been an increase in payments, but that it was largely due to the fact that people could arrange their income in such a way as also to arrange their tax. When my hon. Friend the Member for Edmonton (Mr Love) intervened on the right hon. Member for Wokingham to suggest that people had rearranged their finances to suit the current tax regime, he was told that that was not the case. However, the right hon. Gentleman then talked about how those with high incomes—the rich, in his words—have plenty of ability to rearrange their affairs, so he in fact made precisely our case.
The argument that because something was not done during a certain period, it is not a good idea does not bear scrutiny either. Such a line does not relate to the financial situation in which we found ourselves. We hear a lot about the need for deficit reduction, as we have throughout this Parliament, and we know that the rate of deficit reduction has been far lower than was originally promised and planned for. Many of the changes—to tax credits, to benefits, to local government funding—were justified as absolutely essential for reducing the deficit. Under the previous Government, the reason for introducing the 50p rate was largely about that as well. It was and it remains our belief that we need a better balance when we are trying to reduce the deficit.
We all accept that there is no great virtue in running a long-term deficit. The debate has been about not whether to do something about it but the pace and efficacy with which we do something about it. Within that, there are choices to be made. There is a balance to be struck between taxes and spending cuts, and the Government have chosen to place a lot of emphasis on spending cuts and far less on tax. The 50p tax rate could have been sustained throughout this Parliament as part of the process.
Ian Swales
I am following the hon. Lady’s argument about the tax changes, and I have two questions. First, does she object to the raising of the threshold to £10,000? Secondly, will she oppose her party’s policy of adding a 10p rate? She seems to feel that such things do not help the people she wants to help.
Sheila Gilmore
We have to be honest about the tax threshold. The primary driver behind the change is constantly presented as being concern for the low paid, but the major part of the benefit has accrued to those who are better off. The change also has a substantial cost, at a time when we are told that money is tight. It is worth considering what would help the less well-off in a more concrete way. When the threshold was raised, tax credit rules were changed, tax credit rates were lowered and child care help for people on tax credits was slashed. At some undefined point in the future, the threshold will again be increased, but that is not a lot of help for those who, for the past four years and for however long it takes to establish universal credit, have had their help with child care cut.
The threshold is not what it seems, and we have to be clear about that. If we genuinely want to help the low-paid, we have to consider the model that we use. Many commentators have suggested that, for example, we should consider child care costs and work allowances within universal credit. One change that the Government have made to universal credit since it was first proposed—not that many people are on universal credit yet—is to reduce the work allowances, which means that people lose universal credit faster as their earnings rise, so the low-paid will again suffer. It now turns out that the introduction of assistance covering 85% of child care costs for those on universal credit will have to be paid for from another part of universal credit, so people who, by definition, are not very well off will be paying for that child care assistance. That is rather strange because I do not believe that the tax relief for child care will necessarily be funded in quite the same way. If we really want to help the low-paid, it is worth considering other proposals and no longer simply arguing that raising the tax threshold is helping the lowest paid and will always be the best way to do so.
On the 50p tax rate, I contend that there has been a series of decisions that have heavily affected those who earn the least and are struggling the most, and no number of graphs showing that people at the high end are now paying more tax, or that the proportion of tax changes that affect their income is at least as high as the proportion affecting the low-paid, can show otherwise. The reality is that five percentage points off the tax rate for those on very high incomes is very different from five percentage points off the tax rate for those on very low incomes; it is the difference between parents being able to pay for their children to go on a school trip or being able to think about taking the bus into town because those things cost. A five percentage point difference for someone on a very high income might be the same numerically, but it does not have the same consequences for people’s lives.
Ian Swales
I am following the hon. Lady’s argument carefully, and she is straying from tax into welfare, which I understand is a real concern for her. She makes a good point on the effect of proportionate tax rates. The cut in tax through raising the threshold has actually reduced the tax and national insurance bills of people on the minimum wage by some 70%. If we are talking percentages, does she welcome that figure? Does she also accept that anyone working 30 hours a week or more on the minimum wage is earning £10,000? Finally, will she answer the question about the 10p tax rate? Will she oppose that policy?
Sheila Gilmore
The hon. Gentleman suggests that it is irrelevant to link welfare and tax, but I do not agree. Welfare and tax are intimately linked in a very practical way for someone who may have seen their tax bill go down but who has also seen their benefits go down substantially and so are either no better off or are actually worse off. That is a very real link, because raising the tax threshold has a substantial cost; it is not a pain-free, non-costed policy. At £10 billion, the policy costs a considerable amount of money that could have been spent in some other way. I am not convinced that the net effect for the lowest paid is such that they benefit. Given that so much of the benefit goes to people who are better off, I would have thought he would want to question that policy.
Mrs Mary Glindon (North Tyneside) (Lab)
My hon. Friend makes a good argument. How much more does the increase in VAT affect people on low pay than the very rich? An average family loses £1,350 a year because of the increase in VAT. How can they be helped by the Government’s measures given all the other cuts they have imposed?
Sheila Gilmore
VAT, like a lot of indirect taxation, is extremely regressive. Before 2010, the hon. Member for Redcar (Ian Swales) campaigned vigorously against an increase in VAT, calling it a tax bombshell. He thought that at one point and might continue to think it.
Those policies have an impact, one on the other. Tax is not isolated from spend. As I said at the beginning of my speech, in decisions on dealing with the deficit, we must look at both. The balance we strike is extremely important. Increasingly, the burden is falling on spending cuts, which include cuts on various benefits and tax credits. The cuts to local authorities have been extremely important for many people who rely on the services that councils provide. They have found either that services are withdrawn or that the charges levied for them—for example, charges for social care, whether for people at home or in residential care are rising—are a big burden, as they are for a lot of families. We cannot look at those things in isolation. The Opposition have made proposals, as the hon. Gentleman knows, but at this stage, new clause 4 proposes having a proper look at the 50p tax rate. Labour has made its position clear: we would reinstate the 50p rate.
Finance (No. 2) Bill
Sheila Gilmore Excerpts(10 years, 8 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Danny Alexander
I am going to make some progress. I will give way again later.
The measures relating to the annual investment allowance will mean that 99.8% of firms—almost 5 million businesses —will receive 100% relief on their qualifying investments. The Bill also provides a much-needed boost for our manufacturing sector by placing a cap on the carbon price support rate. That measure will cut energy bills for businesses and deliver around £4 billion in savings by 2018-19 without undermining investment in renewables in any way.
However, if we want to build a resilient economy with a broad base of industries that is fit to withstand isolated shocks, we have to provide support across our sectors. That includes supporting those innovative small businesses that could be the big global brands of the future. That is why the Bill further increases the generosity of the R and D tax relief for small businesses. From today, the payable credit for loss-making SMEs will rise from 11% to 14.5%. The Bill will also support investment in the high-growth-potential companies that need it most. The seed enterprise investment scheme, which has already helped more than 1,600 companies to raise over £135 million of investment, will be made permanent. The capital gains tax reinvestment relief will also be made a permanent feature of the scheme.
Sheila Gilmore
Will the Chief Secretary to the Treasury explain why his Government and his Chancellor decided, on first coming into office, to cut investment allowances, saying that they were not a good way of encouraging investment?
Danny Alexander
It was because our first priority in business taxation was to bring down the very high, internationally uncompetitive headline rate of corporation tax. It was 28% when we came to office, and it will come down to 21% this year and 20% next year. We also chose to reverse the Labour Government’s planned increase in the small firms rate of corporation tax from 21% to 22%. Instead, we took it down to 20%. Those were the right priorities at the start of this Parliament, but given the present encouraging environment for investment, it is now important for the Government to put in place incentives to bring some of that investment forward.
Bridget Phillipson
We should not underestimate the scale of the challenge that companies such as Nissan face. It is incredibly productive and has a wonderful work force, and the Qashqai, which is produced on Wearside, was recently voted car of the year. There is so much good news in terms of Nissan and other big companies in the north-east. However, companies such as Nissan require long-term stability and the ability to make decisions about where investment will come from in the years ahead. The prospect of an in/out referendum hanging over our heads until 2017 and the constant discussion about it are simply not helpful when it comes to jobs and investment in the north-east.
The most recent unemployment figures reveal that the north-east still has the highest unemployment rate in the country, standing at 9.5%. It is clear that the recovery has yet to deliver fully for my area. The picture of youth unemployment is even more troubling. Across the three parliamentary constituencies covering Sunderland, nearly 2,500 young people aged 18 to 24 have been out of work for more than 12 months. In my constituency, that represents an increase of 1,650% in four years.
Our region has seen in the past the economic and social damage caused by long-term unemployment, destroying communities and draining hope from countless good people and their families. Ministers, however, appear to be complacent about the scale of the problem. They should act now and implement Labour’s plan for a jobs guarantee for all young people who have been out of work for more than a year, because it is clear that the Youth Contract and the Work programme are failing. This Bill is another missed opportunity to tackle the scourge of youth unemployment and long-term unemployment in constituencies such as mine.
I speak to many people in my constituency who are desperate to work and who are applying for job after job and getting nowhere. They do not even hear anything or get an interview—they make no progress. It is hard to underestimate the despair that that causes among young people who are without hope for the future and not sure where things will take them. One man who came to my constituency surgery last week told me that he faces the prospect of getting up and looking for work every day, but he has been doing it for too many years now. He is desperate to work and has a lot to offer, but it is a highly competitive jobs market in which lots of highly skilled people who have lost their jobs in the public sector are able to compete and are chasing too few jobs. The Government must address the matter urgently.
Sheila Gilmore
Does my hon. Friend recall, like I do, that when the Government introduced their Work programme, they said that it would be the best ever employment service and that it was meant to help long-term unemployed people? Does she agree that that group does not seem to have received the necessary help?
Bridget Phillipson
Like my hon. Friend, a lot of the correspondence I receive and what people who visit my surgery tell me is that the Work programme is not delivering. They are not getting the help they need from it and they are not getting back to work. In an area such as mine, where long-term unemployment and youth unemployment remain a major concern, it is simply scandalous that the Government are not taking the action necessary to get people back to work. These people are desperate to work and they want to work.
The situation is not a great deal better for those in work. They are struggling to make ends meet with the rising cost of child care, ever-increasing energy bills and falling wages. Parliamentary questions have revealed that, since 2010, men living and working in my area have suffered a 10% cut in real-terms pay—in other words, a cut of £49 a week. Women have seen a drop in their wages, too—they now receive £26 less a week.
I recently visited the Loaves and Fishes food and bank in Easington lane in my constituency. It opened last September and is one of many new food banks that have, unfortunately, opened in Sunderland. Of course, I pay tribute to the volunteers and local community who are coming together to take action. We have always been an area that comes together and responds to need. The compassion and drive of the volunteers is evident, but so too is their sadness—sadness that these food banks need to exist at all. I am proud of their dedicated service, but it is a source of immense regret that local people are increasingly being forced to turn to food banks to survive, including many people in work, as the volunteers told me.
One of the biggest barriers that parents—particularly mothers—face is accessing child care when returning to work. Affordable and accessible child care will support our economy to grow, allow parents to work and give many children the best start in life, particularly those from the most disadvantaged backgrounds. The Bill’s measures, however, will not even kick in until the next Parliament. They do nothing to help parents now. They also help fewer people than previously announced and come after £15 billion-worth of cuts to support for children and families.
When in government, we did much to address that problem. In fact, we were the first Government to accept that, rather than child care being a private family matter, the Government had a role to play in ensuring that places were available. We devoted particular attention to supporting single parents back to work, which was welcomed in my constituency and did much to encourage people back into work.
Just like then, we now also have clear plans to help parents with 25 hours a week free child care for working parents of three and four-year-olds. That will be of real help to parents, who need action now. It is disappointing that the Government measures offer no help to parents struggling to work and pay for child care.
In the north-east, we need a Government who work with us, recognising both the potential and the opportunities that exist, as well as the challenges we face. My constituents, like so many working people across the country, need a Government who are on their side, tackling the issues of falling wages, getting our young people back to work and taking action now to help parents struggling with child care costs.
Economic recovery must be sustained and balanced, benefiting all regions of the country with economic recovery for all, but this Bill simply does not do enough to address that.
Richard Harrington
If the hon. Gentleman will bear with me, I will make a bit of progress first.
The system means that people are effectively signing an employment contract when they sign on—I have seen such contracts, and the purpose is to get people looking for work. It is a programme of looking for work and taking up initiatives that have been derided by the Opposition, such as the work experience programme, the Work programme and other things. But I have seen the system work. It provides a lot of jobs in my constituency. However, the principle of what the hon. Gentleman says, which is that people should not be allowed to rot and do nothing while on jobseeker’s allowance, is right.
The hon. Member for Houghton and Sunderland South (Bridget Phillipson) made a good point that was pertinent to her constituency, and she has met people who have applied for hundreds of jobs and been unsuccessful. I accept that and have heard of similar cases. I cannot compare my constituency with that of my hon. Friend the Member for Cities of London and Westminster (Mark Field), or with Kensington and Chelsea, but in Watford—as the shadow Chief Secretary to the Treasury, who is not here, would know as he is a frequent visitor, for which I am grateful—jobs are available. I am not saying there are jobs everywhere, and it is difficult for anyone to get a job, but I accept that in the hon. Lady’s constituency things are completely different.
Sheila Gilmore
Is the hon. Gentleman concerned that the number of unemployed people remains relentlessly high, despite the talk about there being lots of jobs? Surely we must try to address that because 2.3 million people are still unemployed. That is a serious situation for all those people.
Richard Harrington
I agree with the hon. Lady, but in my constituency the number of those on jobseeker’s allowance has come down from about 3,600 to, I think, 1,700. I have met a lot of those 1,700 people and chatted to them.
Sheila Gilmore
Over the past couple of years in particular the number of people on jobseeker’s allowance has dropped, but the number of unemployed people has not. Only 58% of those who are unemployed are now in receipt of jobseeker’s allowance. The two figures are considerably out of synch.
Richard Harrington
I spend a lot of time at Jobcentre Plus—if the hon. Lady and her colleagues have their way, I am sure I will be spending a lot more time there after May next year—but I do that for a serious reason, which is to talk to people on jobseeker’s allowance. I have heard the Opposition speak about these matters, and one cannot argue with the Office for National Statistics and statistics such as that. However, I wanted to try to get to the bottom of the issue and—I am genuinely not trying to make a party-political point—that has not been my experience in my constituency.
Ian Swales
I will come on to some of those tax rises in a moment. I am just saying that working people are not £1,600 worse off, as the Labour amendment suggests. There is no expert who says that they are.
This Government’s tax cut has reduced inequality. It has been praised by the Living Wage Foundation as reducing the gap between the minimum wage and the living wage, and I am proud that my party has driven it through in this Parliament. It is also good that the Budget shows that there will be real growth in household disposable income from now on.
Sheila Gilmore
Would the hon. Gentleman admit that, for many low-paid workers, the increase in the tax threshold over the past few years has been more than cancelled out by the cuts in tax credits, the freezing of child benefit and other changes? In fact, the Government have given with one hand and taken away with the other.
Ian Swales
Everyone is in a different situation, but it is certainly not true to say that, for more people, the Government have given with one hand and taken away with the other. The hon. Lady should know that.
The Opposition’s reasoned amendment also mentions a “tax cut for millionaires”. This is from a party whose former Business Secretary said that he was
“intensely relaxed about people getting filthy rich”.
And it showed in what the Labour Government did for 13 years: the top rate of income tax was 5% lower than it is now until 6 April 2010, the very last day Labour Members sat on the Government Benches—until then they cut taxes for millionaires every year they were in power; capital gains tax was 10% lower, meaning that hedge fund managers in the City had a lower tax rate than those cleaning their offices; tax relief was available on pension contributions of £250,000 a year, whereas the current figure is £40,000—the difference is £100,000 in tax; and VAT was 2.5% lower, making a top Ferrari £5,000 cheaper—that is what was actually happening for millionaires.
Jacob Rees-Mogg (North East Somerset) (Con)
It is an enormous pleasure to follow the hon. Member for North Durham (Mr Jones), who always entertains the House with his eloquence. I am sorry that he has been relatively brief today. On previous Finance Bills, he has held forth for over an hour, and I was hoping for something similar.
The hon. Member for Glasgow North East (Mr Bain) started with a list of anniversaries, but he was remiss in not mentioning that today is the anniversary of the death of Eleanor of Aquitaine, which I happen to think is rather more interesting than the anniversaries he was able to provide us with.
It is a great pleasure to support the Government on this Finance Bill. It is worth looking at some of the figures that have been batted back and forth during the debate, some of which seem, to some degree, to have been invented by the Opposition. The real figures show that the Government can be proud of their record. Let me run through them, if I may. They are a mixture from the World Bank and the Red Book. GDP declined by 0.8% in 2008 and by 5.2% in 2009. I think that some people may have missed that downwards revision by the Office for National Statistics. GDP rose by 1.7% in 2010, by 1.1% in 2011, by 0.1% in 2012, and by 1.8% in 2013. The key to those figures is that since this Government have been in office, there has been no triple-dip or double-dip, as was predicted; in fact, the economy has grown because the Government have followed the right policies.
Sheila Gilmore
Did the hon. Gentleman feel that the predictions that the Chancellor gave to this House and the public in 2010 and 2011 were over-optimistic, or did he think they were okay? I seem to recall that the Chancellor was not predicting that level of growth.
Jacob Rees-Mogg
The hon. Lady is aiming at the wrong target. The Chancellor, in his considerable wisdom, decided to make these forecasts independent and therefore set up the Office for Budget Responsibility. That is how we know that we are competent. Indeed, Labour is desperate that the OBR should view its own figures. An independent body was set up to give these forecasts so that there was no legerdemain in what the Chancellor was doing.
Sheila Gilmore
If those were the forecasts of the OBR, based on the position as it saw it in 2010, does the hon. Gentleman agree that it must be the Government’s policies thereafter that have meant that those forecasts have not translated into reality?
Jacob Rees-Mogg
That does not follow. It is like looking at the weather forecast on the BBC and saying that it is the fault of the newsreader if the weather then turns out to be different. The two are not the same. The forecasts were made in good faith, based on what was known of the global economy at the time. But of course, things change and responses are different. The global economy continued to be relatively sluggish, but the figures that have been achieved by the Government are enormously respectable. There has been economic growth pretty much since 2010 and, most importantly, in the past couple of years. Everyone knows that economic policies have a long-term impact. If a Government come to office in May 2010, we cannot expect the figures in June 2010 to be the result of that Government’s policies—there is inevitably a lag. The effects, as we have seen, have been positive; the economy is now growing, and growing increasingly strongly.
The problem that the Government faced when they came to office was severe. The deficit in 2009-10 was 11.2% of GDP, falling to 10% of GDP in 2010-11. That is not the structural deficit but the actual real money deficit. I happen to think that is a much better figure than the structural deficit, which is to some extent speculative, as economists try to work out what is structural and what is not. If we deal with actual fact, the figure was minus 11.2% in the last year of the socialists, falling very slightly to minus 10% in the first year of the coalition.
The reason the deficit was so high was of course in part the global financial crisis, but it was also because Government spending was simply too high. It had reached 47.4% of GDP in 2009-10, when revenue was only 36.2% of GDP. That latter figure for tax revenue ought not to be any surprise. One of the most remarkable things about this series of figures, going right the way back to Harold Wilson’s prime ministership, is that Governments find it incredibly difficult to get much more than 37% of GDP in taxation. It is interesting that, since 2010, although the Government have increased taxation and the tax take has gone up from 36.2% to 37.4%, the amount has not risen as much as was anticipated. The reason is that it is actually very hard to tax much more than 37% from an economy.
Sheila Gilmore (Edinburgh East) (Lab)
I cannot help but feel that the speech by the hon. Member for North East Somerset (Jacob Rees-Mogg) was very much in the vein of Marie Antoinette—“Let them eat cake.” Many people find it positive that we redistribute money and help those who need assistance in our society, but the logic of his argument is that we should revert to a position in which it does not matter if some people cannot afford education or to have a decent roof over their head, because they are still looking after their own money, even if the amount is very limited. That might be because of their health, because of their disability or because the opportunities that they have grown up with are not as great as those of others. In his view, that is fine and we should go back to that kind of society. I, for one, do not want to do so.
We were told that this was a Budget for savers. The problem is that, for many people in this country, the figures that were talked about are fantasy. They will never be in a position to benefit. We have to care about that. A study by HSBC in October 2013 stated that 25% of households had no savings. That was up from 19% in a similar survey that it carried out 2012. It also stated that 10% of households had less than £250. That means that 8.8 million households—not individuals, but households—to all intents and purposes have no savings.
One of the first things that the Government did on coming to office was to abolish plans for the Saving Gateway, which had been put in place by the previous Government, and abolish child trust funds. One of the first Public Bill Committees that I served on took away those things, which were there to encourage and assist people who did not have a great deal of disposable income to save. Clearly, those savers are of no interest to the Government. The people who will benefit from the increase in tax-free saving through ISAs are in a minority in this country.
I listened to what the hon. Gentleman said about the tax threshold. There is an illogicality in taxing people who are on the minimum wage. The problem is that the increase in the tax threshold has not benefited people in that situation. It has gone right past many taxpayers and it has cost a great deal. We are lectured endlessly about there not being enough money and about tough choices having to be made, but £10 billion has been spent to date—not including the further increase in this Budget—on raising the tax threshold. That is tax that is forgone. Three quarters of the benefit has gone to people with above-average earnings, not those on low earnings.
The 17% of the population who are already beneath the tax threshold are gaining nothing. Government Members have said that everyone is gaining £700 from this Budget. Obviously, that does not include the 4.5 million people who make up that 17%. Clearly, those people do not count. Far from gaining from the Budget, those people will be losing.
There are alternatives to raising the tax threshold. If the Government’s aim is to help low-paid workers, which is what Government Members say, why did they decide to cut tax credits by so much? My hon. Friend the Member for Glasgow North East (Mr Bain) spoke about universal credit work allowances. It has been suggested that one way to help low-paid workers would be to increase the taper on the replacement for tax credits for people on universal credit who are in work. However, the Government decided when they first invented universal credit that the work allowances would be cut back. That means that people will lose their credits much more quickly than would otherwise have been the case. That will happen without the further changes to the universal credit rates and tapers that are clearly intended by the Government, who want to fund the extra help with child care for low-paid families from other low-paid people. We are told that that will be funded out of universal credit.
The problem with universal credit is that we are not sure that we will ever see it. We certainly will not see it for a considerable time. Universal credit, which was meant to make work pay for everyone and was the answer to so many problems, currently covers about 3,500 individuals in the whole country. It was supposed to roll out to all new applicants for all sorts of benefits in October last year, but the event horizon keeps moving away. Given that, perhaps the Government would like to rethink some of their thinking on credits. To say to low-paid parents that at some point 85% of their child care costs will be met “under universal credit”—those are the words that are always said—is not a great help if we do not know when it will come in. For those people it will certainly not be 2014, 2015 or 2016, and for many probably not even 2017. In the last timetable we were told that some people would not be included even by 2017, and given that no timetable from the DWP has come anywhere near being introduced, it is perhaps not surprising if I am somewhat sceptical. Perhaps help with 85% of child care costs for low-paid families could be introduced now, rather than wait for universal credit.
We hear a lot about jobs and how many more there are, but I wish to raise a point that I have made several times recently: despite those jobs, the level of unemployment remains stubbornly high in this country and it is time the Government did something about it. Some 2.3 million people are still unemployed, and in the Chancellor’s speech last week he said that 169,000 was the reduction over 2010. When I said, “Only 169,000?” there was a kind of outcry from the Conservative Benches: “Only? Isn’t that important?” Of course it is important, but it is not anywhere near the number of new jobs that we are constantly told have been created.
What exactly is going on? Are we not worried about the 2.3 million people who remain unemployed, many of whom do not appear to be on benefits? The argument that benefits are so comfortable and that is why people are not working does not appear to apply because 58% of those unemployed people are not on the JSA count. Every time some of us ask questions, Government Members—particularly Ministers—produce figures and say, “Unemployment in your constituency has gone down by this, that or the other”, but they are giving the claimant count not full unemployment figures. It is important to have policies in place to help with unemployment.
I am tired of things being thrown at the Labour party that are simply not true. One of the favourites is, “Unemployment always rises under a Labour Government.” It is not true. It was not true of the Labour Government between 1945 and 1951, and the extent of the increase during some of the other Labour Governments was very small indeed, and similar to that of Tory Governments. In only one of the three periods of Tory Government—1951 to 1964, 1970 to 1974, and 1979 to 1997—did unemployment stay the same. In both the others it went up. Between 1979 and 1997, unemployment rose. It was only 5.6% at the beginning, and more than 7% afterwards. In 13 of those 18 years, unemployment was more than 10%. It is not true that unemployment rises only under Labour Governments or that it has been higher at the end of every Labour Government than at the beginning. The record of a party that put the country through 18 years of government, in which unemployment was more than 10% in 13 of them, is not one to be proud of or boast about. Perhaps we could hear a little less of those soundbites that are not accurate before Members come to debate in this House.
For the low paid and people who are struggling in this economy, the Budget will not offer much help. On pensions, do we remember the 1980s or do we not? The 1980s pension reforms, which tore apart the state earnings-related pension scheme, were boasted about as freeing people up from the dead hand of the state to have personal pensions that they could make choices about, and it would be fine. It turned out that for many people it was an extremely bad choice. That has led to the decline in the level of pension saving. People did not build up pensions over those years. If the state earnings-related pension scheme had been left alone, an awful lot of people would have been much better off in their retirement, and perhaps the Labour Government, when we came to power in 1997, would not have needed to introduce pension credits to lift pensioners out of the high level of poverty many were then suffering.
Some of us are sceptical about a pensions policy that appears to have been written on the back of an envelope. The boast is that it will give freedom to everybody. That sounds good and it is very hard to argue against—people have the right to use their own money—but remember the result of the 1980s. We are still picking up the pieces from that. To change something as big as pension policy, we need to sit down and work it out first, not announce it in the Budget and then work it out. Within a week, the Government have had to announce tweaks to help people now. Suddenly, people were saying, “Have I got to buy an annuity now, when if I just wait till next year I will not have to?” Another change had to be put in to allow people within that period to draw down now, rather than buy an annuity. That suggests there was not much planning, because clearly nobody had thought that that would happen. That is not the way to make pension policy. It is not giving people a wonderful freedom if they find out some years later, as happened in the 1980s, that there will be catastrophic results. At least model it and work it out properly. It might have made headlines, but it may come back to bite later.
Charter for Budget Responsibility
Sheila Gilmore Excerpts(10 years, 8 months ago)
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The Chancellor of the Exchequer (Mr George Osborne)
I beg to move,
That the modified Charter for Budget Responsibility, which was laid before this House on 19 March, be approved.
I am putting before the House today a charter for budget responsibility updated to include a new cap on welfare spending. I am conscious that this is a time-limited debate and will keep my remarks brief so that others can speak. The welfare cap marks an important moment in the development of the British welfare state. I believe the public back a welfare system that provides fair support for those genuinely in need and that supports those who have a disability and cannot work; those caring for others; those on maternity or paternity leave; and those who have lost a job and are trying hard to find work. The public, through their taxes on that hard work, are willing to pay for that support. It is a level of support that a country such as ours—we now have a growing economy—can afford to give.
However, that is not the welfare state we inherited in 2010. That welfare state was not fair and not affordable. It was not fair that some received £50,000, £60,000 or up to £100,000 in housing benefit, paid for by taxpayers who could never dream of affording homes with rents that big, so we capped housing benefit payments at just over £20,000 a year.
Mr Osborne
I will give way in a moment.
It was not fair that many out-of-work families received more as an income in welfare than the average family got from going out to work, so we capped the total benefits that one family can receive at £26,000. Thirty-six thousand households are now subject to the cap.
Sheila Gilmore
How many families received housing benefit at the level he first mentioned—the £50,000-plus mark? Is he aware that, of the families covered by the benefit cap, nearly half are in temporary accommodation provided by councils because they owe them the statutory duty?
Mr Osborne
First of all, 21,000 people have been affected by the housing benefit cap, so 21,000 people were receiving housing benefit more than that. Secondly, the hon. Lady seems to be suggesting that she is against the cap on benefits. That points to a wider truth that we will discover today about the welfare cap, and specifically whether the Labour party is committed to the cap we are setting out today, with the list of benefits in it. We will discover whether Labour is committed to the cap at the level we have set—not just the principle of a welfare cap, but the practical application of it.
amendment of the law
Sheila Gilmore Excerpts(10 years, 8 months ago)
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Mr Pickles
My right hon. Friend and I are as one on that matter. He will recall that the Government have consulted on this and on other issues related to parking, and that the consultation period has recently ended. We hope to make an announcement in the very near future.
New measures in the Budget will also help to support the building of a further 200,000 new homes for hard-working people, on top of the work we have already done to kick-start house building. New house building and construction output in England is now at its highest level since 2008, and new housing construction orders are at their highest levels since 2007. More than 170,000 affordable homes have been delivered since 2010, and £20 billion has been invested in affordable housing over the spending review period.
More council housing has been built under this coalition Government than in all the 13 years of the previous Government. I honestly do not understand why Labour Governments do not build council houses. Since the last quarter of the last century, the two really big builders of houses have been the Thatcher Administration and this coalition Government.
The number of first-time buyers is at its highest since 2007, and mortgage arrears at their lowest since the Bank of England’s figures began in 2007. The number of empty homes is at its lowest rate since records began and, in the last year, new housing registrations rose by 30% in England and by a massive 60% in London. In fact, the number of new homes registered in London last year was the highest since electronic records began more than 26 years ago.
By contrast, new home registrations fell in Labour-run Wales. House builders have shifted their business across the border to England because of the Welsh Government’s anti-business policies. This is due to Labour’s extra red tape, and to its botched implementation of home ownership schemes. By contrast, thanks to this Government, more than 17,000 people have already bought a home through Help to Buy. Overwhelmingly, these are first-time buyers, and they are mainly outside London and the south-east. This shows how we are supporting all parts of the country, north and south. Help to Buy is a key part of our long-term economic plan, giving thousands more people the security and independence that comes from owning their own home.
The Budget’s pension reforms will offer freedom of choice for people who work hard. It would be helpful if the right hon. Member for Leeds Central could clarify whether the Opposition support these reforms, or whether some ambiguity still exists. Our pension reforms, such as allowing the newly retired to pay off their mortgage and be liberated from the banks, will also lead to greater security in old age. I do not agree with the doom-mongers who say that this will somehow lead to a problem with buy to let. This Government are dramatically expanding the opportunities for institutional investment in the private rented sector, through guarantees and our build to rent schemes. These offer the opportunity for savers to invest in new built rented accommodation and to receive long-term, stable returns from the property market.
Sheila Gilmore (Edinburgh East) (Lab)
I have a genuine question for the Secretary of State. If someone used their ability to draw down their pension to pay off their mortgage, have the Government considered the impact that that might have if they were to require social care assistance in the subsequent years?
Mr Pickles
We have to understand that people who save up for their retirement have worked hard to put together a nest egg and are therefore unlikely to squander it. We should trust people to put together their own schemes. This move has been widely welcomed across the industry and by pensioners groups. Indeed, it has been widely welcomed by everyone but the hon. Lady.
Mr Pickles
No, the hon. Lady has had her chance. That’s it.
We are also ensuring that small and medium-sized house builders get a share of our housing revolution. A new £525 million finance fund will deliver 15,000 houses on smaller sites. We are cutting red tape, too. Today, we have published our proposals for scaling back section 106 charges on small home builders. We are introducing an exemption from section 106 tariffs for self-builders and extensions, building on our exemptions already delivered from the community infrastructure levy. Yet again, the Labour party has not been clear about whether it supports cutting these stealth taxes on self-builders. Self-builders will also benefit from further steps to free up land for self-build; a £150 million investment fund for custom-build plots; and a new right to a plot and to build from councils. Further planning reforms will help get empty and under-used buildings back into use. Those build on the success of our “office to residential” planning reforms, measures the Labour party opposed, despite the fact that they are providing new homes on brownfield sites in our towns and cities.
We are also supporting the first garden city for a generation, at Ebbsfleet—decisive action and investment that Labour failed to deliver. The original announcement was made in John Prescott’s 2003 sustainable communities plan, but the Labour party failed to build at Ebbsfleet.
Amendment of the Law
Sheila Gilmore Excerpts(10 years, 9 months ago)
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Vince Cable
The hon. Gentleman poses an issue that I am coming on to immediately, which is why we are a poorer country. There are people who have saved and have annuities, and there are many middle-income occupational pensioners who will take advantage of that. The central economic question raised is this: why are we a poorer country and how has that affected our living standards?
The question goes back to the financial crisis, which occurred when the right hon. Gentleman and his colleagues were in government. The Chancellor reminded us yesterday of the brutal fact that the British banking collapse and rescue was the biggest in the world. It was the biggest collapse in our history, going back not just decades but centuries, and it has done enormous harm. It has made the country poorer. The immediate after-effects of the collapse were to reduce output in this country by 7.5%, which is more than in the great depression. Not surprisingly, that has affected living standards in a radical way. It has impaired our capacity to recover from the damage inflicted on the banking system. It has required our country and the United States, but particularly here, under the right hon. Gentleman’s Government and the coalition Government, to resort to very unorthodox monetary policy. That has had a major impact on savings—which the Chancellor is now trying to remedy—asset prices and other factors. Opposition Members are surprised and indignant when they tell us that people are poorer than they were before the financial crisis. What are they comparing it with?
Sheila Gilmore (Edinburgh East) (Lab)
The Secretary of State seems to be avoiding the fact that people are poorer not since the financial crisis, but since 2010. Changes to tax credits, benefits uprating and so on have, for the lowest paid workers, more than outweighed any advantage gained from raising the tax threshold.
Vince Cable
The distributional analysis, which I am sure the hon. Lady has studied, suggests that the biggest impact of this shock has been on the highest 10%. That may be surprising, but that is what has happened.
Vince Cable
Let me just take apart particular aspects of the argument that has been put forward: how it relates to jobs, production and earnings. Let me start with jobs.
Vince Cable
I have taken an intervention.
Let me start with employment. What could well have happened, as a result of the financial crisis and its aftermath, was mass unemployment of the kind we had in the 1930s. We could very easily have got up to 20% unemployment, but we did not. We now have the lowest unemployment of any major country except Germany—lower than France and Sweden. This is partly a reflection of Government policy, but it is mainly a reflection of the common sense and flexibility of British workers, who accepted that in this crisis it was most important to be in work. We are now seeing the success of employment policy in the fact that we have had an enormous growth in employment, with 1.25 million net of public sector job losses and a gross increase of 1.75 million. Roughly five private sector jobs have been created for every one lost in the public sector. These are predominantly, in fact overwhelmingly, full-time jobs. The Opposition’s argument has been, “Well, okay, there are lots of jobs but they are part time,” but last year, in 2013, there were 460,000 new jobs, of which 430,000—95%—were full-time jobs.
Budget Resolutions and Economic Situation
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David Mowat (Warrington South) (Con)
It is a pleasure to follow the hon. Member for Wrexham (Ian Lucas).
There are four tests of a Budget that we could reasonably apply. First, is the cake growing? Secondly, are we distributing it fairly? We will come to that. Thirdly, did the Budget get tempted by short-term electoral considerations or was it long-term and structural? Fourthly, when the Chancellor had an opportunity, was he radical and reforming? On all four measures, this Budget is a success.
First, on growth, as we have heard, we are the fastest-growing country in the OECD—that is a tremendous statistic—and growing faster now than even the United States and Canada. In particular, we are growing faster than France, the country on which I believe the Opposition base their policies. Secondly, are we distributing the results of that growth fairly? We just heard a speech about fairness from the hon. Member for Wrexham. Income inequality in our society is at its lowest level for 28 years. Why is that? Because this Government increased capital gains tax by around 40% when they came in and have increased stamp duty by more than that. Both measures are bringing in significant amounts of revenue.
The Opposition are caught up in the debate on the 45% and 40% income tax rates. That is not how to achieve more equality in society. People are getting rich because of capital gains. Five years ago I knew people who were paying 10% capital gains tax under the previous Government when they sold their businesses. We have fixed that, which is why income inequality is much lower now. A further reason is that we are getting a great deal more in revenue from sorting out tax avoidance.
The third test is whether the Budget was designed for short-term electoral gain or whether it introduced long-term structural change. Some measures will kick in fast. The £500 extra on the personal allowance will come in quickly, but the Chancellor has spent just as much money as he spent on that on the carbon price floor, support for energy-intensive industries and the investment allowance. None of those things will take effect in the short term and all of them are important to the structural rebalancing of the economy.
Sheila Gilmore (Edinburgh East) (Lab)
I do not know whether the hon. Gentleman has had time yet to look at the OBR report. The comment on the investment allowance in that report is that it will make very little difference to economic growth.
Sheila Gilmore (Edinburgh East) (Lab)
In June 2010, the Chancellor led his band of merry men, straw men and tin men on the yellow brick road towards his emerald city: the elimination of the deficit by 2015, the cutting of public sector net borrowing to £60 billion in this financial year—in fact, it will be £108 billion—and growth of about 2.5% every year during this Parliament. The trouble was that he fell off his yellow brick road fairly quickly and started wandering around in the wilderness of low growth and higher borrowing. Suddenly, after four years, he seems to have found himself back on his road, albeit not as far down it as he expected. Like all expeditionary leaders, he is quick to tell us that he always knew where he was, and where he was going, and that it was all part of his long-term plan, despite the fact that he has not gone as far as he expected.
Does all that matter? It does, for a number of reasons. We are being asked to believe that someone who gave us that fantasy journey can still give us something credible. It also matters very much to the people who had to accept the austerity measures that we were told were essential to get us down the road as quickly as possible. People have suffered, and to find out four years on that we have not actually made much progress is bitter gall for many.
What about the people left behind? The cost of living crisis is real. People’s real earnings have fallen. All the Treasury and Institute for Fiscal Studies figures show, slightly differently, that the people who have lost out most are those at the bottom and the top of the earnings scale. However, for someone to lose 5% when they are earning £3,000 or £4,000 a week is very different from losing 5% when earnings are £150 or £200 a week. The impact on everyday life in the latter case is far greater, because the issue is not about having to cut out a few little extra luxuries—perhaps not go out for a meal as often as one might otherwise have done—but about basic foodstuffs, heating the house and buying clothes for the children. It is not good enough to say that the situation is all right because the people at the very top have also seen an income drop, which makes it fair; in the real world, that is not fair.
The other group that the Budget has rather lost sight of is the unemployed. People often say that unemployment has dropped by such and such a percentage, but the number is still very high. In April to June 2010, 2.46 million people were unemployed; according to today’s figures, the number is 2.33 million. I make that only 130,000 fewer than in 2010. Unemployment, of course, went up between 2010 and now and has come down again, and that doubtless explains some of the percentage drops that people are talking about. However, 130,000 fewer unemployed people, although better than before, is quite marginal.
What are we doing for the 2.3 million unemployed people? There are still 700,000 more people unemployed than before the recession. Where are the measures to get those people into work and to help the young people about whom my hon. Friend the Member for Rotherham (Sarah Champion) spoke so eloquently? There are very few such measures. Talking about percentages going up and down as if we have solved the problem is no answer to people struggling on very low incomes who, in many areas, cannot find jobs no matter how hard they try.
On the child care proposals, at least one Government Member made a lot of the fact that child care costs for those on universal credit are now to be met by up to 85%. We have now had, or will have had, at least five years of this Government cutting help with child care costs from 80% to 70% for people on tax credits—the predecessor of universal credit. So for each of these five years, those people will have found things much more difficult. It is not clear when families in this situation will even be on universal credit, given how that is going at the moment. Will this provision start when the tax relief starts, or will it start only when these families finally get on to universal credit, if that happens? We have not been told.
Moreover, the proposal is to be paid for not by people who are better-off but by another group of people on universal credit. We do not know which group of people because we have not yet been told; apparently, we will know in the autumn. The change will be financed entirely out of the universal credit budget, so some families with children on universal credit will get a little bit more, but somebody else is going to get a certain amount less.
We always make choices in policies, and that is why debates about matters such as raising the tax threshold are exceptionally important for all of us. The 5 million people who are already below the tax threshold will get nothing out of this move. Some 10% of the total cost, which has already been about £10 billion, goes towards lifting people out of tax; 15% of it goes to people on median earnings of up to £26,000; and three quarters of it goes to people earning above the median. That choice has been made, but it could have been made differently. The money could have been used, and could still be used, to help people on lower earnings. If we want to help low-earning families, there are a number of other measures that we might want to use, but we are not using them. This is a choice that the Government are making. Constantly portraying it as something that is there only to help low-earning families does a disservice to those families. They know the situation; they know that they do indeed have a cost of living crisis that is not being resolved by today’s Budget.
Ordered, That the debate be now adjourned.—(Mr Gyimah.)
Debate to be resumed tomorrow.
Oral Answers to Questions
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Nicky Morgan
I thank my hon. Friend for his question. I am delighted that his constituents will benefit from the rural fuel rebate scheme, which means that, as I said, his constituents will have more money to spend on themselves and their families in other ways.
Sheila Gilmore (Edinburgh East) (Lab)
10. What steps he plans to take to assist people who earn below the income tax threshold.
The Exchequer Secretary to the Treasury (Mr David Gauke)
The question was about help for those who earn below the income tax threshold. It is worth pointing out that 2.7 million people who earn below the current income tax threshold would be above the threshold but for the actions of this Government to raise the personal allowance. Those in work who do not pay income tax have benefited from, for example, frozen fuel duty and council tax, and reduced energy bills. The Government are also introducing universal credit to ensure that work always pays.
Sheila Gilmore
I thank the Minister for his reply, but I am not sure that the 17% of employees—4.6 million people—who are already under the income tax threshold will be impressed by the main policy being to increase the threshold yet again. The problem for these people is that the tax cuts that have taken place already have been more than wiped out by reductions in working tax credits and child tax credits. What targeted help will the Government give to such people, such as extended free child care or serious work on earnings thresholds being increased?
Mr Gauke
I have to remind the hon. Lady of the state of the public finances when we came to office and the very difficult circumstances that we face. The fact that 2.7 million people have been taken out of income tax as a consequence of our policies shows the emphasis by the coalition Government on supporting those in low-paid work.