Living Standards

Stephen Williams Excerpts

Monday 5th March 2012 Commons Chamber

[Stephen Williams (Bristol West) (LD)]

We have debated many Opposition motions on the economy and public finances in the past 20 months, and this one is little different from the many others that I have discussed—I have spoken in all these debates. We are asked to focus on the needs of hard-pressed families—we are hardly likely to disagree with that—and on pensioners, but the whole tenor of this motion, like all the others that have gone before it, is that the coalition Government should do more for some people and should reverse the planned changes that they have set in train. So despite the U-turns that the shadow Chancellor and the Leader of the Opposition have made in recent weeks on the need to cut the deficit, we are exactly where we have been before on all other Opposition days. We are back with uncosted proposals somehow to make us all believe that tackling the deficit can be a painless and, indeed, invisible process of fiscal rebalancing. It is as if public finances can be restored to health by magic, with no tax rises and no expenditure cuts—it simply is not credible.

[Toby Perkins]

The hon. Gentleman mentions the importance of tackling the deficit, but he will recognise that by 2013 this policy will be out of date because of the incoming universal credit. What is the point of putting 200,000 people through tremendous pain for the sake of 18 months? When the Government review their books in 2015 that figure will have entirely disappeared, so why not wait until the universal credit has come in and sort the system out at that point?

[Stephen Williams]

I thank the hon. Gentleman for his intervention and I think he made the same point to the Minister. The coalition Government have a five-year programme of reform, which includes cutting the deficit as well as long-lasting reform of our entire welfare state, which has evolved over a long period of time. Many of the reforms, whether they are on the universal credit, pensions or other parts of the welfare state, are designed to last for a generation whereas the deficit reduction measures are, of course, short-term measures, painful as they might sometimes be. I acknowledge that for many households and some families what this Government are having to do—not because we choose to do it, but because we have to do it—causes discomfort.

What matters most to all households is putting our public finances and our economy back on track. That gives our country fiscal credibility and allows our Government, businesses and households to borrow and invest at affordable rates.

[Helen Goodman]

The hon. Gentleman clearly has not read the motion, which makes it absolutely clear that our proposals on working tax credits will be matched by an increase in tax take on stamp duty from those people who have houses worth more than £1 million and who are offshoring. That would match the revenue needed for the working tax credit.

--- Later in debate ---

[Stephen Williams]

All I can say is that the hon. Lady must have been reading an earlier draft, because that is not what the motion says. I shall discuss tax avoidance later in my speech, as I am sure she will be pleased to hear.

Even in the tough fiscal environment that the Government face, it is right that we should do what we can to help low-income households. That is why the Government are absolutely determined that the budget will not be balanced on the backs of the poorest and those in work who have low earnings. The Government will not repeat the fiasco that happened in good times under the previous Government. The Chancellor who became Prime Minister, in his last Budget as Chancellor, abolished the 10p rate of income tax, raising income tax for the lowest paid in society and all his hon. Friends, who, at the time, sat on the Government Benches and waved their Order Papers with glee that a tax on the poorest in society was funding a tax cut for the rich.

[Meg Hillier]

rose—

[Stephen Williams]

I have given way twice and I am on a time limit, unlike some previous speakers. The hon. Lady will have her turn later.

That is why reducing the tax burden for the lowest paid is the No. 1 priority, as far as the Liberal Democrats are concerned, of this coalition Government. I and all my colleagues stood at the last election on a promise that the income tax threshold would be raised to £10,000 and the coalition Government’s first budget raised the threshold by £1,000 to £7,475 a year, taking 800,000 people out of income tax altogether and giving a £200 tax cut to every basic rate taxpayer. From next month, the threshold will be raised again to £8,105, cumulatively taking 1.1 million low-paid people out of income tax altogether with a cumulative income tax cut for every basic rate taxpayer of £330. That is £330 extra take-home pay, particularly for part-time workers, who are disproportionately women and young people, that they can spend immediately in their communities.

Two weeks ahead of the Budget—16 days, as the shadow Chief Secretary kept saying—the Liberal Democrats want the Chancellor to go further and faster in announcing a timetable to reach that £10,000 threshold in this Parliament. We want to know that when all our constituents go out to work, they will be able to take home £10,000 a year and not face the burden of income tax. That will send out a message that we are determined to make work pay and to reduce the tax burden for everyone on the basic rate of tax.

[Sheila Gilmore]

rose—

[Helen Jones]

rose—

[Stephen Williams]

I have already given way twice and I am on a time limit.

The same arguments apply as when the Government had to take tough decisions on whether to raise out-of-work benefits in the comprehensive spending review and the last autumn statement, and those benefits were raised by the high consumer prices index of 5.2%. Child tax credits have also been raised by 5.2%; that is £135 extra this year. As the Minister said earlier, there has been £390 extra cumulatively so far since the general election. Difficult decisions are being taken on the reform of tax credits. The Liberal Democrat manifesto explicitly said that we thought there was scope for the reform of poorly focused tax credits. In 2010, nine out of 10 families with children received tax credits and, even after the difficult reforms we are introducing in these tough fiscal times, six out of 10 families will still receive tax credits.

Child benefit is another area in which the Government have to make a tough choice. If the Labour party’s message is that it opposes even that tough choice of withdrawing child benefit from the richest families in the country, where on earth is it going to find the cuts? I look forward to hearing, in all the Labour speeches between now and 10 o’clock, what alternative cuts would be made to replace that cut in child benefit. The cliff edge of the higher rate tax threshold is difficult. We all acknowledge the anomaly that was expressed in the extreme by the hon. Member for Wansbeck (Ian Lavery) regarding the earnings of two people in a household. The Deputy Prime Minister confirmed this morning that we are looking for ways to smooth that withdrawal of benefit from those who are marginally over the threshold; we will have to wait until the Budget to see the outcome of those discussions.

The Government are introducing other measures to support families with children. This morning, I visited a secondary school in my constituency, St Mary Redcliffe, and on Friday I visited the City academy in my constituency as well. Both those schools and all the other schools in all our constituencies are benefiting from the introduction of the pupil premium. Parents who are working need support with child care, and the Government are introducing 130,000 extra places for two-year-olds.

At least this motion mentions pensioners. The last time we had an Opposition motion on living standards, it neglected to mention pensioners at all. That was hardly surprising because the Government had just announced the largest cash increase in the state pension since it was introduced by Lloyd George and Asquith in 1908. The Government have a triple lock in place to ensure that pensioners always receive an increase. We will not have the embarrassment of 75p pension rises in future.

The Government are taking action on tax avoidance. I note that the motion says that everything Labour wishes for, whether on child benefit, child tax credit or working tax credits, is somehow going to be paid for through tax avoidance measures that are unspecified in the motion. That would have more credibility if Labour had voted in favour of the tax avoidance measures introduced by the Government in the last Finance Act, rather than voting against them. I want to see more action on tax avoidance in the Budget, such as a general anti-avoidance rule, and I look forward to hearing what the Chancellor has to say—

[Madam Deputy Speaker (Dawn Primarolo)]

Order.

--- Later in debate ---

[Sheila Gilmore]

There is a long-term benefit in people learning from their parents what it is to work.

We used to hear so much about the couples penalty from the Conservative party. It used to say that there should no longer be a couples penalty and to talk about how unfair it was. However, this provision creates just such a couples penalty. A couple who lose their working tax credit might look at their neighbour, who is a single parent, and think, “She’s not losing her working tax credit. That doesn’t seem fair.” Why, when we have heard so much about that, are the Government creating a new penalty for the sake of just 18 months or two years?

That all comes on top of the decision not to increase working tax credit in line with inflation. We have heard a lot, particularly from the hon. Member for Bristol West (Stephen Williams), about how wonderful it is that benefits will rise by 5.2% in the coming year, as if it is some unique act of generosity. In fact, people are simply being given the rate of inflation.

[Stephen Williams]

There were, of course, other choices that the Government could have made. There were voices —I will not say who they were—telling the Government not to raise benefits by that historically high rate of inflation. The previous Government used the lowest possible rate when they raised pensions by 75p. This Government took a different view.

[Sheila Gilmore]

I think that the hon. Gentleman would accept that the 75p increase followed the rate of inflation. I might not have made that decision if I had been the Chancellor of the Exchequer, but that is the decision that was made.

I am pleased that the hon. Member for Bristol West and his colleagues, who are remarkably absent from this debate, managed to persuade the Government that out-of-work benefits should increase by the full amount. I support that. What I find strange is that a Government who wish to support work did not take the same view about working tax credit. I am not talking about levelling down the increase for out-of-work benefits. I am talking about a decision that increases the degree to which work does not pay, when the Conservative party says that it wants work to pay. If all these things are taken together, one begins to wonder where the Government are going.

People are sceptical about universal credit and anxious about what will happen. Let us consider something else that will happen under universal credit. Somebody who is working and who qualifies for universal credit will have their universal credit reduced if they have savings of more than £6,000 and eliminated if they have savings of more than £16,000. People who have managed to save, perhaps towards buying a house or towards their retirement, will be told, “You don’t need support, so we’re going to take it away from you.” Despite all the Government’s warm words about how much they want to support hard-working people and people who save, this is another example of how their policies will not do that in practice.

I say one last time to the Minister: change now. You —the Government, not you, Madam Deputy Speaker—know it makes sense.