Finance (No. 4) Bill

Simon Hughes Excerpts

Monday 16th April 2012 Commons Chamber

[Danny Alexander]

I recognise my hon. Friend’s concern. On churches, she will be aware that, as we said in the Budget, we will increase the listed places of worship scheme by £5 million a year, precisely to enable churches that have alterations to benefit from the scheme and not to be adversely affected. However, our investment in transport infrastructure and a number of local transport schemes, and the massive investment in broadband in rural areas—we are investing £520 million to ensure that every part of the country has the latest superfast broadband—will make a major difference to rural economies. Along with the increases to the income tax personal allowance, to which I shall turn in due course and which will particularly benefit rural areas, where incomes tend to be lower than in urban areas, there are many reasons why the rural economy will benefit significantly from the measures taken by this Government. Enterprise zones will help to promote growth in every part of the UK.

The Budget included an announcement of a package of measures to ensure that we fulfil our potential to extract the greatest possible amount of oil and gas from our reserves in the North sea through a major package of tax changes. We will end the uncertainty on decommissioning tax relief that hangs over the industry by entering into contracts with companies. We will also introduce new field allowances, including a £3 billion new field allowance for large and deep fields, to open up west of Shetland, the last area of the basin left to be developed. Clause 184 gives the power to introduce new brownfield allowances as and when the industry can demonstrate the need for them in specific areas through the information it shares with the Government through the new processes that we have established. Those measures together are a huge boost for investment in the North sea.

We continue to support economic development in the devolved Administrations. Clause 189 devolves the power to the Northern Irish Assembly to set rates of air passenger duty for direct long-haul flights from Northern Ireland, which will help to protect the vital direct air service to the US, supporting tourism and businesses in Northern Ireland.

The Government will not relent as we seek to restore prosperity across the country. We are committed to promoting business enterprise, investment and exports across all parts of the UK. Securing sustainable growth and creating sustainable private sector jobs are the best ways to support families and raise living standards in the long run. Of course, I understand that these remain tough times for many families across the country. That is why the Bill reinforces our commitment to helping the lowest-paid in the country while ensuring that those with the broadest shoulders continue to carry the heaviest burden.

[Simon Hughes (Bermondsey and Old Southwark) (LD)]

Some of us have been frustrated in recent weeks that that point has been obscured by bigger press reporting of changes with much smaller consequences for the Treasury. Will my right hon. Friend put on the record the relevant impacts and costs, including the number of people benefiting from the threshold changes compared with the number benefiting from the other, much more marginal changes that matter little to most of our constituents, including, I think, his?

[Danny Alexander]

My right hon. Friend is right that the single most significant measure in the Budget was the largest ever increase in the income tax personal allowance. I will dwell on that in detail in a moment but his point—

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[Rachel Reeves]

The point I am making is that the consumption growth forecast for this Parliament is being funded by increased indebtedness. A VAT reduction would boost the spending power of households without their having to take on extra debt. With incomes stagnating and, in many cases, falling, many families are resorting to taking on more debt because they cannot afford to make ends meet—that is the point I am making. That is why a reduction in VAT would help put money into the pockets of ordinary families, who are struggling so much with rising gas, electricity, train, bus and petrol prices.

[Simon Hughes]

Has the hon. Lady seen the OECD reports, which make it clear that raising tax thresholds is a far more effective way of getting money back into the economy than changing VAT? Such an approach benefits poorer people much more, whereas VAT changes benefit the rich just as much as the poor.

[Rachel Reeves]

The right hon. Gentleman would do well to look at the analysis by the Institute for Fiscal Studies, which shows that the increase in the personal tax allowance most benefits those who are in the second highest income decile. Increasing the income threshold is not a progressive policy; in fact, pensioners do not benefit from it at all, and nor do people who are on such low incomes that they do not pay income tax—[Interruption.] The right hon. Gentleman says something from a sedentary position. I am happy to take another intervention if he wants to dispute the analysis of the IFS.

[Simon Hughes]

Of course some pensioners will not benefit, but some will. Some pensioners receive an income on which they pay tax and the rise in the threshold will benefit them. The hon. Lady has avoided my question about the OECD study, which makes it very clear that if one is choosing between reducing VAT and increasing the threshold and if the aim is to help people on lower incomes and to get money into the economy, one should go for the increase in the threshold.

[Rachel Reeves]

That is just not true and it is not accurate. A reduction in VAT helps people who do not pay income tax, which includes the poorest people, and benefits pensioners. The increase in the personal tax threshold does not benefit pensioners one jot, nor people who are not earning enough to benefit from a change in personal allowance. A cut in VAT helps all those people, however, including the lowest paid who will not benefit from the changes to the tax threshold. The right hon. Gentleman is just wrong.

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[Rachel Reeves]

The Labour party voted against the entire Finance Bill, including the cut in the 50p rate. On Wednesday and Thursday, we will have an opportunity to vote on the tax cut for the wealthiest 1%, and I hope that Members on both sides of the House will join us in the Lobby to vote against a tax cut for the very wealthiest in society at a time when ordinary families are being asked to pay more.

[Simon Hughes]

rose—

[Rachel Reeves]

I look forward to hearing how the right hon. Gentleman will be voting later this week.

[Simon Hughes]

The hon. Lady was not a Member in the last Parliament, and she used a phrase that I find a bit rich. The Labour Government regularly failed to close the loopholes to deal with tax evasion and tax avoidance, and only in their last weeks in office put income tax rates up to 50p in the pound, yet the hon. Lady now comes to the House saying that she would prefer not to change the top rate of tax even though it might be far less effective than a range of measures that would make the wealthy pay five times more. Does she want the wealthy to pay more? If so, is she willing to support measures that would deliver that?

[Rachel Reeves]

I want the wealthy to pay their fair share in the deficit reduction, which is why I shall be voting this week against a cut in the taxes for 14,000 millionaires. Figures from the Institute for Fiscal Studies show that in Budget 2002—a Labour Budget—anti-avoidance measures were worth £1.7 billion. In Budget 2003—a Labour Budget—there were £1.7 billion of tax avoidance measures, and in Budget 2004, £1.7 billion-worth of tax avoidance measures—I could go on. The point is that in the Budget this year—a Conservative Budget, with a little bit of help from the Liberal Democrats—tax avoidance measures are worth £0.8 billion, lower than in all but two of the last 10 years. The idea that it is a tax avoidance Budget just does not stand up in the statistics. The Institute for Fiscal Studies knows it, so perhaps Members on the Government Benches should look at those numbers. Of course we should cut down on tax avoidance, but we should not then compensate the rich by giving them a tax cut worth £3 billion. If the right hon. Gentleman really wants to cut down on tax avoidance and ensure that the wealthy pay more, I hope he will join us in the Lobby to vote against a tax cut for the richest in society.