Finance Bill

Thomas Docherty Excerpts

Monday 2nd July 2012 Commons Chamber

[Graeme Morrice (Livingston) (Lab)]

Thank you, Mr Deputy Speaker, for giving me the opportunity to contribute to this debate in support of the Labour Opposition amendments.

I was a member of the Finance Bill Committee and attended each of the 18 sittings over the past several weeks; obviously I must have been bad in a former life. It was clear to me that the more the Bill was scrutinised in Committee, the more it was revealed that the Bill, and the Budget that it will enshrine into statute, is the omnishambles that many commentators have described it as.

Once again, the Tories are showing their true colours. It was a classic Tory Budget, with millions paying more so that millionaires can pay less. That is evidenced by the fact that, as we have heard throughout the debate, 14,000 millionaires will receive a tax cut of more than £40,000 a year, while 4.4 million pensioners will lose an average of £83 a year. It is a classic Tory Budget, but with the difference that it was possible only thanks to the support of the Liberal Democrats—the Lib Dems who continued publicly to oppose any change to the 50p rate of income tax immediately prior to the Budget statement but then voted for it; the Lib Dems who, before the last election, repeatedly stated their opposition to immediate public spending cuts, only to support a Budget reduction of more than £6 billion within two weeks of forming the coalition; and, lest we forget, the Lib Dems who promised not to raise VAT and then raised it.

The 50p rate raised about £1 billion in its first year and could have raised £3 billion a year over the lifetime of this Parliament and beyond. Its continuation could have been used to cut fuel duty, not just freeze it, as we agreed in the previous debate. Many of my constituents have written to me about that. It could have been used to reverse the Government’s damaging cuts to tax credits or help reduce the deficit. Instead, the Chancellor chose to give the richest 1% of earners a huge payout. People on middle and low incomes are already being squeezed by rising fuel, energy and food prices. Now, their tax credits and child benefit are being cut. Yet again, the Government have made the wrong choice and proved how totally out of touch they are.

The aspect of the Budget that has undoubtedly caused the most anger among my constituents is the decision to freeze the personal allowance for pensioners, which will help subsidise the Chancellor’s bumper tax cut for the rich. That was buried in the Budget’s small print, and the Government tried to make out that it was a tidying-up exercise. However, nobody was fooled by that. It was clear that it was actually a £3 billion tax raid on pensioners. No wonder that was the only aspect of the Budget that was not leaked in advance.

How will the Chancellor’s tough talk about cracking down on tax evasion and aggressive tax avoidance, which he says is “morally repugnant”, be put into action if the resources of Her Majesty’s Revenue and Customs continue to be cut? Some 10,000 jobs will go by 2015, including 240 processing posts at Pentland House in my constituency.

Labour’s five-point plan for growth offers an alternative vision. If the Government followed our advice and implemented a £2 billion tax on bank bonuses to fund 100,000 jobs for young people, we would begin to see some progress on tackling the scourge of youth unemployment. Instead, millions are left to pay for a Budget for millionaires—a classic Tory Budget, but this time supported by the discredited Liberal Democrats.

[Thomas Docherty (Dunfermline and West Fife) (Lab)]

I should, in the interests of probity, place on record the fact that my wife works for Age Scotland. I declare that interest.

The contrast between the two sums of money that we are debating has been mentioned several times. There is the £3 billion of tax cuts for millionaires’ row, versus the £3 billion by which our pensioners will be worse off as a result of the punitive measures employed by Liberal Democrat and Conservative Members. Personal allowances for the over-65s, our golden generation, are to be cut in real terms in the coming year. As several hon. Members have mentioned, that will mean that a pensioner who turns 65 in the next year will be up to £323 a year worse off. In these hard-pressed times, with the rising cost of living, rising energy and water prices and the flatlining of their savings, they can ill afford to pay that tax. It is worth contrasting their situation with that of the people who will be the greatest beneficiaries of the Government’s decisions.

I know that many Members are fans of a popular US television programme called “The West Wing”. For hon. Members who do not own a television, let me explain that it is about a wonderful Democrat politician, whom Members of all parties might aspire to be, who is pitted against a mad, right-wing Republican Congress that pursues more and more absurd policies. Even “The West Wing” could not countenance the idea that in a time of austerity, when deficits have to be reduced, a right-wing party—or the two right-wing Government parties—would call for tax cuts for the very wealthiest. Even Speaker Haffley in “The West Wing” would not support such ludicrous so-called economics.

--- Later in debate ---

[Ian Mearns (Gateshead) (Lab)]

Would my hon. Friend care to speculate on how many of the 14,000 millionaires who will be super-beneficiaries of the measures will stop moving the mountains of cash that they currently move to avoid paying tax when the top rate is reduced from 50p to 45p? Surely if they move mountains of cash to avoid paying 50p, they will not move any less to avoid paying 45p.

[Thomas Docherty]

I suspect the best and fastest way to answer my hon. Friend’s question would be to attend the next Conservative party fundraising drinks event, where I am sure many of those millionaires will be buying the Minister a rather hearty round.

Much has been made of the quad’s all-night drinking session. I am sure they were drinking fine Scotch malts—indeed, no fine malts are made outside Scotland—but they should have spent more time looking at the detail of those two decisions. In direct contrast to the hon. Member for Dover (Charlie Elphicke), I would argue that pensioners on an income of £10,000 a year are not among the wealthiest pensioners in the country. If Conservative Members believe pensioner households struggling to get by on £10,000 are wealthy, it goes to show how staggeringly out of touch they are.

[Jacob Rees-Mogg]

I am extremely grateful to the hon. Gentleman for giving way and am enjoying his wanderings through the drinking habits of certain Members of the House, which I am not sure are directly relevant. Why is it fair that pensioners should have this benefit but not families who have a £10,000 allowance who are struggling with children? Why is it fair that the benefit should be age-related?

[Thomas Docherty]

I always give way to the hon. Gentleman, who knows more about age than anyone in the House. He needs no history lesson, but the measure goes back to the end of the second world war, and the concept of the greatest generations—those who have given a lifetime of sacrifice. It is worth noting that, just last week, we unveiled a long-overdue memorial to some of that greatest generation. I am sure he would recognise their sacrifice.

[Jacob Rees-Mogg]

The measure was introduced earlier, I believe by Winston Churchill; indeed, an hon. Member asked earlier how we could overturn what the great man had done. The wartime generation are having the benefit frozen; they are not losing it. The people who are not getting it were not born when the war was going on.

--- Later in debate ---

[Thomas Docherty]

I cannot believe the hon. Gentleman’s hearing is going. I began by saying that a cash freeze is a real-terms cut. I am sure he would agree with that.

[Jacob Rees-Mogg]

The Government’s wonderful policies are very successfully bringing down inflation; there has been a substantial fall. In addition, oil prices are coming down and there is a cut in fuel duty. That amazing combination means everything is working very well.

[Thomas Docherty]

With an intervention like that, it will not be long before the hon. Gentleman is sitting on the Front Bench speaking for the Government on Treasury matters. Perhaps I can help him on another matter, though, because several references were made to Take That. For his benefit, let me say that they are a popular beat combo who can often be found on the wireless. He might enjoy listening to them.

[Jacob Rees-Mogg]

rose—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. We do not need to worry about Take That and radios for today. I think that the circus has carried on long enough.

[Thomas Docherty]

I am most grateful, Mr Deputy Speaker.

[Ian Mearns]

Would my hon. Friend care to reflect on the fact that we have just heard from the hon. Member for North East Somerset (Jacob Rees-Mogg) a celebration of stagflation?

[Thomas Docherty]

My hon. Friend is correct. This is not a time for celebration, as the cost of living continues to rise and the cost of energy and other precious commodities heads in the wrong direction. The real-terms cut faced by pensioners this year will make their lives much harder.

It is also worth reflecting on who will benefit from the proposals outlined by Ministers. We are talking about footballers, pop stars and “Big Brother” contestants. We talk about wealth generation and the value of people. With the greatest respect, I would argue that those three categories should not be given priority over our greatest generation. I know that the Minister is a courageous soul and, for his sins, an Ipswich Town supporter—such as that can be—but I wonder whether he truly believes that the value given by Ipswich Town players last year or this year was greater than the value given by the greatest generation in our nation. Surely, he must reflect on whether Middlesbrough, Ipswich Town, Sunderland, Leicester City or Crystal Palace players should really be prioritised over our pensioners.

[Gloria De Piero]

Did my hon. Friend notice the inconsistency of the Liberal Democrats on this matter? In January, they said it would be very wrong to reduce the 50p tax, but by March they were briefing that they were not ideologically wedded to the tax. Has this episode not demonstrated their powerlessness in government?

[Thomas Docherty]

I often think that the Business Secretary would make an excellent contestant on “Strictly Come Dancing”, such is his fleetness of foot. In fact, I am sure that tomorrow morning there will be leaflets out in Brent and elsewhere condemning and disowning this Government policy, as if Liberal Democrat votes had not yet again carried the argument, leaving Ipswich Town footballers and others better off and our greatest generation worse off. This is a poverty of policy. It is the worst example of what happens when the quad sits up drinking and it will leave the country with a dreadful hangover.

[Sheila Gilmore]

The policy on the higher tax rate is, in effect, an endorsement of tax avoidance, which worries me greatly. Some of us sat through the Finance Bill Committee and heard Government Back-Bench Members say how much they disapproved of tax avoidance, but throughout this episode we have heard people argue that because some people have taken steps to avoid tax, we should reduce it. That is highly unsatisfactory to the many people who, on pay-as-you-earn, have little ability to avoid tax. They are gobsmacked by all this.

If part of the problem was due to people forestalling, which is the technical term, in the first year of the new tax, perhaps—and this is a thought for the future too—we should have introduced it with immediate effect, as happens with some other taxes. For example, tobacco duty is generally increased on the day of a Budget, so that people do not rush out to fill their shopping bags—or whatever they do. Perhaps that would have been a way around it. I know it is not traditionally done with increases in tax rates, but if that is how people respond to these things, perhaps we should treat higher earners like we treat people we think will fill their bags with cheap booze or cigarettes, and forestall them, rather than letting them forestall the rest of us—because that is what they are doing to the communities in which they live. Unfortunately, in a year’s time, we are likely to hear Government Members saying “We told you so” even more. The reduction has been postponed for a year, but it will still happen, and a lot of people will no doubt do the same thing in reverse when it does.

It has become something of a mantra to say that no money was ever raised from the 50p rate of tax, but that is not true: £1 billion was raised, even in the year in which people were apparently forestalling. If we had let it run for somewhat longer, the situation could have been even more different. However, as the Institute for Fiscal Studies pointed out, to rush to judgment on this matter so quickly, because that suited the way in which the Government wanted to go, was not justified. We are, in effect, saying to people that it is all right to avoid tax.

I started to tell a little story earlier, and I hope that it will be seen to be relevant. I am fascinated by history, and particularly by housing, and—unusually, for me—I watched a television programme last night. It was entitled “The Secret History of Our Streets”, and last night’s episode was about Portland road, in London. It had been made long before the current debate on the Budget. A young, brash banker got up and said that the value of the property on that street had gone up even further since the taxpayers had bailed out the banks. Did we really think, he asked, that the banks were going to start lending to small businesses? No, they were going to give people like him an increase in income so that they could pay even more for those houses. He might have been one of those boastful types, but that was nevertheless an insight into the mindset of the kind of people in our community who think that tax avoidance is absolutely legitimate. There is a great deal of wealth in this country, as that example showed, and many ordinary people find this whole debate offensive and difficult to swallow.

At the other end of the tax issue, we have the question of raising the tax-free allowances. The Government keep saying how kind they are being to people on low incomes, but we should remember that once those people have had their tax allowance raised, they will get no further advantage in subsequent years because they are already out of the income tax regime. Other people, however, have gained considerable advantages from the raising of the basic tax threshold. Many people on considerably higher earnings—although not necessarily paying higher rates of tax—have gained from the measure.

It has been easy—for the Liberal Democrats in particular, as this is one of their favourite lines—to say that raising the tax threshold is all about helping the very poorest. However, the very poorest were already outside the income tax regime, and people on considerably higher earnings—particularly two-earner families without children—have benefited substantially from the raising of the threshold. We must also take into account what people on the margins who have been taken out of tax have lost. When we look at the details, we see that as a result of the measure, they could lose tax credits and, in some cases, housing benefit. Their gain is therefore very much less than has been suggested.

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[Jacob Rees-Mogg]

The pensioners are not being robbed. The pensioners have been extraordinarily well looked after by this Government, and rightly so. I agree in many respects with the hon. Member for Dunfermline and West Fife (Thomas Docherty), who talked earlier about how important the elderly were to our society. He called them the golden generation. I thought that, out of respect to Her Majesty, we ought to call them the diamond generation, as they are all over 60.

Of course we owe a great deal to the elderly. That is why it is right that they have kept their bus passes—which they are pleased to have, although there are not many buses in North East Somerset—and their winter fuel allowances. If they are over 75, they will also retain their free television licences so they can watch the BBC free of charge. I think that many of them prefer Sky nowadays, but that is a separate issue. The Conservative party, in alliance with our Liberal Democrat friends, has looked after the pensioners.

As for the thresholds, it is absolutely right that they should be evened out. Let us consider the people who are paying tax across the country. How is it fair for those who have retired to be given an automatic tax break, rather than those who are working hard and perhaps bringing up children? They need the income just as much as the pensioners, and in some cases more. That, I think, was bold and brave of the Government, and right.

I want to begin, however, by discussing the easiest step to defend—the one that was so startlingly obvious that it is surprising that the Government did not take it earlier and go further. I am talking about the reduction in the 50p tax rate to 45p. We know well that high taxes drive out enterprise and people, and drive down tax revenues. That is not because of evil schemes of tax avoidance; it is because people simply decide that if they are not going to get paid, they will not work. They remove their labour. Our socialist friends—

[Thomas Docherty]

rose—

[Jacob Rees-Mogg]

I give way to my socialist friend.

[Thomas Docherty]

Does the hon. Gentleman really believe our society is enhanced by these pop stars and premiership footballers?

[Jacob Rees-Mogg]

It has to be said that I am not the world’s greatest expert on pop stars and footballers, but none the less I think they bring a richness to our national life that enlivens many people in my constituency, and even in Scotland. They want to watch the highest quality football being played.

This is relevant, Mr Deputy Speaker, in case you think I am going off on a tangent. I have thought that it would be a good idea to remove the limit on overseas players in cricket, because that limit has been removed in association football and it has led to our having in this country the highest quality league football, and in English cricket—

[Jacob Rees-Mogg]

Thank you, Mr Deputy Speaker, but the reduction of tax is what encourages them to be here and why they do not decide to work in other countries instead.

[Thomas Docherty]

I am pretty sure, Mr Deputy Speaker, that the England cricket team is very good and the England football team is not very good.

[Jacob Rees-Mogg]

But my concern was about Somerset county cricket club. Football teams such as Manchester United do very well through having more foreign players. Somerset, however, has yet to win the county championship, but this lower level of tax and greater freedom in employing overseas players may lead to its achieving that.

Returning to the question of the 45p tax rate, we have had a discussion about avoidance in that context, and I want to defend tax avoidance. I know this is not the most popular cause to espouse, but I do so because I believe in the rule of law, and I do not believe the rule of law is best maintained by Parliament being arbitrary in its taxation.

We have the power, through our votes this evening, to set rates of tax as we choose—to set schemes that allow people to be charged tax, or not to be charged tax, as we choose. If we in this House are too incompetent to draw up the tax law properly, is it reasonable to say to the taxpayer, “You must work out what Parliament may have wanted. This is not what is said, but Parliament may have wanted you to pay this extra amount on top”? Should we then also say that to people who put money into their individual savings accounts? Should we retrospectively say that they ought to have paid more tax on their ISA sums, or on their pension funds?

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[Mr Gauke]

I strongly disagree, but before I turn to tax avoidance let us remember that between one third and one half of the reduction is because of less participation in the labour market. It is not because of the decline in the economy; we are talking about people moving elsewhere, people retiring earlier and people working fewer hours because it is not worth their while, in their opinion, to work as hard as they would otherwise do. Let us not forget that when someone moves from this country to Switzerland, we miss not just the difference between 45p and 50p, but everything, the whole 50p, and not just that bit above £150,000, but the first £150,000. That is the consequence of a tax rate that drives people out of the country and does not attract them here.

[Thomas Docherty]

Can the Minister tell me two premiership footballers who have left the country because of this tax rate?

[Mr Gauke]

No I cannot, but I know that, for example, the Arsenal manager remarked that the 50p rate put him at a disadvantage. Earlier, the hon. Gentleman mentioned Ipswich Town and whether its players deserved a tax cut or pensioners did, and I have to say that on last season’s performance one or two looked as if they could qualify for the age-related allowance, but that is not at the heart of my argument.

The point is that we have to be competitive, and we want to attract talent to the UK, but having a higher rate than France, Italy and Germany is not competitive.