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I shall deal with both those issues. The hon. Gentleman suggested that I was seeking to be unduly party political and partisan. I was not. I was seeking to explain the Prime Ministers motivation for introducing this policy. His motivation was unduly party political and partisan, and it is very difficult for me to explain that without appearing to touch on the same ground myself. It remains crucial to understanding this
fiasco that one also understands what motivated the then Chancellor to introduce the policy in the first place. I can tell all those Members for whom the scales have not yet fallen from their eyes that it was not a concern for the poorest people in this country. If that had been his motivation, he would have rejected the policy instantly. It was done because he wanted to position himself in a way that was politically advantageous over the Conservative party in particular, and to a lesser extent, over other Opposition parties. That was the motivation and that is what has led to the woeful state of affairs within the governing party at the moment.
The Liberal Democrats have made it abundantly clearafter all, we have not suffered from a lack of debate on this subject and the Finance Bill, which has been discussed for monthsthat our priority for taxation is to reduce the burden on people on low and low-to-middle incomes who, we feel, are paying too much. Why has this become such a salient political issue at this time? It is because food prices, council tax bills and petrol prices are rising and the sort of people who might not have felt the pinch quite so badly when the then Chancellor announced this policythe economy was then still growing at a reasonable rateare now feeling that pinch very acutely indeed. That is why, when the history of the Brown premiership comes to be written, this issue will be seen to symbolise the entire failure of this Prime Minister and this Government.
Lynne Jones (Birmingham, Selly Oak) (Lab): I would like to make it clear to the House that I have never in my life waved my Order Paperand certainly not on Budget day 2007. To me, the abolition of the 10p rate would have been acceptable only had it been replaced with a zero tax band for the same amount of income, and I commented to that effect on the day.
The majority of the British people have an innate sense of fairness. Whether they vote Labour or not, they see the Labour party as the party of fairness and they look to a Labour Government to implement their policies, including fair policies on taxation. People were so outraged when they learned that some of the poorest people were going to lose out as a result of the abolition of the 10p tax rate because it offended that innate sense of fairness. That sentiment applied not just to the people who were to be worse off, but was shared by many of their friends and neighbours and others who knew about their situation. That is why I supported the amendments proposed by my right hon. Friend the Member for Birkenhead (Mr. Field) in 2007 and why I wrote to the Government expressing my concerns.
My amendments Nos. 102 to 106 would enable someone who had lost out from the abolition of the 10p rate to opt to be taxed at that previous rate. I have to admit that I did not think up that idea myself; it was based on ideas submitted in a letter to the Financial Times on 8 May by Mr. John Curran. At that time, I felt that it was worth while to put that option to the Chancellor for consideration. It was certainly not intended as a permanent solution, but as a stop-gap that would have precisely targeted all the losers, so it would have been much more cost-effective
than the Governments eventual announcement. I have to say that I wrote to the Chancellor on 9 May; obviously, my letter had not reached him by 13 May, when he announced that the Governments proposed solution was to raise the tax threshold. Despite that alteration, we found that 20 per cent. of the losers were still waiting to be compensated, so I decided to table my amendments and to support the new clauses proposed by my hon. Friend the Member for North-West Leicestershire (David Taylor) to flag up the fact that it was unfinished business.
We cannot continue with the situation in which 1.1 million families are still losing out from the measure, so I, too, seek cast-iron assurances that the Government will fix that. I wrote again to the Chancellor, and last night received a letter from my right hon. Friend the Financial Secretary. I accept her explanation that it would be difficult for people to identify whether they would gain from my proposals if their terms were combined with the Governments raising of the tax threshold. I will not, therefore, press my amendments, but it is right to debate the matter and for Labour Members who feel as I do to express their concerns and to look to the Government to provide solutions.
At the end of his speech, my hon. Friend the Member for North-West Leicestershire had an exchange with my hon. Friend the Member for Luton, North (Kelvin Hopkins) on the need to overhaul the tax system to make it fairer. I believe that far too many people on low incomes pay tax, and I find it unacceptable that people on less than half average earnings pay income tax. If we want a fairer tax system, we must raise substantially the threshold at which people start paying tax. I accept that that would have ramifications higher up the income scale, so a smooth clawback from high earners, in as simple a way as possible, would be necessary.
Like my hon. Friend the Member for Luton, North, I would look to a Labour Government to implement a fair tax system, which takes as many people as possible out of tax altogether, and which is progressive up the income scale. That would require at least one further rate of income taxas long as rounded figures such as 20, 30 or 40 per cent. were maintainedand I would also advocate a 50p rate for those earning more than, say, £100,000 a year. In that way, we could respond to the express view of many people in society that a Labour Government should implement fair taxation.
Mr. Redwood: I urge the Government to think again, and more promptly than their timetable suggests. I do so because many of our constituents are worried sick about the state of their family budgets. Food prices are rising rapidly, and the combination of tax increases and price increases is putting enormous pressure on family energy budgets, especially to meet the fuel bills for motor cars, which many people need to get to work or to the shops, especially in rural areas. At this juncture, the last thing that such people need is extra pressure on their respective budgets from the kind of tax increase that we are discussing. The Government would be well advised to think again about their timetable, and to consider whether they can go further to respond to this very serious and good debatewith perhaps one exception from the Liberal Democrat Benchesand to make people feel a bit easier about their future and their family budgets.
My hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond) has asked the two crucial questions. The first question is: what will be done next year? Is the package for one year only? Surely when people are worried about whether their income will stretch, they need some earlier indication of what might happen in the following year. The second question is more urgent and important today: what will be offered to the 1.1 million people, who, as the Government admit, along with their critics, are losing out from the mishandled package of tax changes? Can there be some statement to reassure them? I was disappointed that the Minister did not choose to inform the debate more at the beginning. Paradoxically, that has required her to listen to rather more critical commentsand I suspect there may be further such comments if other Members catch your eye, Mr. Deputy Speakerbefore beginning to allay some of the fears that have been expressed. When I offered her an opportunity to reaffirm the promise that I thought the Prime Minister had made to the right hon. Member for Birkenhead (Mr. Field) that all the losers would be compensated, it was with regret that I heard that she could not do so. There seemed to be some backsliding.
As I listened to the very reasonable and sensible speech of the hon. Member for North-West Leicestershire (David Taylor), who came up with a relatively cheap package, I did not see the Minister leap to her feet and say that it would not do the job. Nor did I see her leap to her feet and say that, compared with the £2.7 billion that the Government have managed to find from borrowing to deal with the first part of the problem, this was a very cheap solution, and that she would either adopt it or view it very sympathetically. Many Members, understandably, will feel that the hon. Gentleman deserves better. I hope that in her response the Minister will consider his suggestion carefully, and will tell us either that there is a cheaper and better way of delivering what is needed, or that the Government will adopt it.
I understand why my hon. Friend the Member for Runnymede and Weybridge, who has no access to the Treasury computer, the Treasury models, the Inland Revenue figures and so forth, cannot come up with a scheme that would fill the hole in the cheapest way possible. I also understand why, conscious of the massive over-borrowing that is currently taking place, he is reluctant to offer any proposal that would add to that, when it is the Governments duty to present the House with such a proposal. I hope that the Government will indeed present proposals to try to satisfy those of us who are worried about their over-borrowing by reducing some of their waste and unnecessary spending, along with the proposals that are so desperately wanted by Members throughout the House to help those on the lowest incomes in society who have been at the wrong end of the measures that we are discussing.
The right hon. Gentleman has spoken of proposals to find a way out of the problem that have been made by Members across the House. He has mentioned some of the interesting and innovative ideas that have emerged from those on the Labour Back Benches, and the contributions from his own Front-Bench spokesman. Have I misunderstood something, or have the Liberal Democratsnotwithstanding the extraordinary
20-minute diatribe that we heard earliernot tabled any amendments with any proposals that have anything to do with helping out of their difficulties any of the people about whom they keep claiming to be so concerned?
Mr. Redwood: The hon. Gentleman has made an effective partisan point in his own way. That is also my understanding of the position. However, this is a serious debate, and I do not think we expected the Liberal Democrats to come up with a means of solving the problem for our constituents. We heard a long diversionary diatribe that might have been appropriate in a grand Second Reading debate or as part of heated exchanges, but now, on Report, we are trying to find a working solution, and there are solutions on offer.
We naturally look to the Minister for leadership, because she has access to the figures and because she and her colleagues were the architects of the circumstances that caused this particular problem. I urge her again to recognise just how much people are hurting out there. Anyone who has been involved in recent political campaigns anywhere in the country will know that the dominant issue on the doorsteps is peoples fear of going to the supermarket because the price of food has gone up again, their fear of filling up the car because the price of petrol has gone up again, and their fear of receiving energy bills because the price of energy is going up again. Their wages, for good reasons, are not going up by enough to compensate for that. We all know that there will have to be a real squeeze on people, but it perplexes us that the squeeze is to be more intense on those on the lowest incomes because of this tax proposal. Let me say again to the Minister that we need some kind of offset to tackle that particular twist of the knife.
As every Member in the House knows, I am a passionate tax-cutter: I always want lower taxes. However, I am keen for the disproportionate benefit of that tax reduction to be felt lower down the income scale, particularly at a time when there is a real fear of the family bills because of the sudden surge of price increases, and a worry that there may be job losses and worse to come as the credit crunch and the squeeze intensify.
Kelvin Hopkins: I recently looked at our history. Between the 1920s Labour Government and the 1980s Conservative Government there was a rise of 73 per cent. in the number of people living in poverty. That was partly as a result of changes in tax policy at that time, and partly as a result of the decision to break the link between earnings and pensions. Therefore, I must admit that I feel some scepticism when I hear Conservatives talking of their concern about poverty.
Mr. Redwood: I do not recognise the hon. Gentlemans figures, but I do know that poverty has been rising recently under this Government, so he should be extremely careful about what he says. People are more interested in today and tomorrow than the dim and distant past. I remember that the Conservative Administrations to whom he refers made sharp reductions in income tax across the piece, thereby benefiting those on lower incomes as well as those on higher incomes, and we were very pleased to do that. Today, I am, however, explaining my personal position in todays circumstances, and I think it is reflected by my Front-Bench colleagues, in that we feel that the squeeze is too intense and that it is not right for it to be intensified by tax measures.
I remember when the Budget we are discussing was delivered. The big reduction in income taxes for the rest of the peoplethe reduction in the standard ratecame at the very end like a rabbit from a hat. My right hon. Friend the Leader of the Opposition had to rise to respond not having had the benefit of any pre-briefing of what the Chancellor was going to do. In the meantime, the shadow Chancellor, myself and one or two other Conservative Membersincluding, I suspect, the shadow Chief Secretaryhad a quick look at the figures and realised what was going on, and the shadow Chancellor immediately left the Chamber to tell the nation it was not a tax cut but a tax con. That was his phrase, and it summed up the situation extremely well. I was the next Conservative Member after the Leader of the Opposition to speak in the debate, and I explained why we felt this was a misjudgment and that quite a lot of people would lose from the proposal.
Mr. Jeremy Browne: I am enjoying the right hon. Gentlemans partisan speech, but, on a point of accuracy, the Conservative party leader welcomed the policy and the first Member of this House who raised the concerns we are discussing was a Liberal Democrat.
Mr. Redwood: The hon. Gentleman is quite wrong. The Leader of the Opposition made a careful and sensible speech for someone who had not had a chance to read the Budget. Everybody else who spoke in the debate had had a chance to read bits of it, and as we well know it is necessary to read the Budget as well as to hear it in order to understand what is going on. For understandable reasons, the then Chancellor was much prouder of the tax reductions than he was of the tax increases, and that needed to be filleted out from the documentation. I am just explaining what happened at the time.
The Government have had a long time to consider the sensible criticisms that were made at the time of the Budget and subsequently. By now, Ministers must have done an awful lot of homework and figure-work on this problem; they must have been worrying away for weeks, if not months, on the 1.1 million. Therefore, I urge the Financial Secretary to share a bit more of her thinking with us in order to allay the fears among her own Back Benchers and to deal with the sensible criticisms voiced by the Opposition. Above all, she needs to say to the 1.1 million people not just that the Government wish to be on their side, but that they will take a practical measure to try to assuage some of their grief.
Mr. Frank Field: I shall be brief, which I think will be found merciful. Let me first, however, comment on the great Liberal lion that roared and roared this afternoon. I thought that at any moment there would be some great proposals to help the lowest paidsuch as we would have hoped for and expected from Lloyd Georgebut what happened? A dribble came out about bookkeeping arrangements and offering transparency. They are not unimportant considerations, but this debate is about how we can help the poorest workers in our society, and on that matter the Liberal Democrats spokesman managed, under great prompting from Labour Members, to devote two minutes of his time and had no proposals on the amendment paper that offered any hope.
I rise to speak in favour of new clause 20. I come to praise the Government, but also, as gently as possible, to leave a warning with my right hon. Friend the Financial Secretary. I do not intend to rewrite the history, as some have been trying to do, of the events leading up to the Governments additional Budget measures to compensate most of those who lost out from the abolition of the 10p rate. All I wish to say to the Government is that although many of the leadership thought that I was running some sort of campaign, I do not think that we sent out even two e-mails on the issue. Labour Back Benchers responded instinctively on this issue. There was real anger felt that, for whatever reasonthrough oversight or by designthe burden of the Budget should fall on the very poorest. It was that anger that led to the Governments statement.
We should all remember that when the negotiations were going on, we all thought that the Government would say nothing until November. The Government brought forward what we intended to be only part of the measures of compensation. All of us were content at that stageI certainly wasthat we would not see anything until November. The Chancellor of the Exchequer sent my right hon. Friend the Member for West Dunbartonshire (John McFall) off with his Committee to inquire into the matter and bring back proposals. The Chancellor would then come to the House with a set of measures to compensate those who had lost out. Let us remember the lead-up to this debate: none of us expected the Government to do anything until November. The Government have given details of many of their plans that will come into force in September. We do not think that they go far enough, but we should praise the Government for what they have done.
Mr. Simon: Is my right hon. Friend saying that the serious changes that will affect the lives of millions of our poor constituents have come about through a spontaneous outpouring of pressure and concern from Labour Back Benchers? The right hon. Member for Witney (Mr. Cameron) and the hon. Member for Tatton (Mr. Osborne), and the Liberal Democrat Front Benchers, gave the impression that they were foremost in bringing this important matter to public attention. Is it actually because of pressure by Labour Back Benchers that our poor constituents will be looked after in this way?
Mr. Philip Hammond: I have great respect for the right hon. Gentleman, and he deserves credit for keeping this issue before the House and forcing the Governments hand, but he is a little disingenuous when he says that we did not expect the Government to act until the pre-Budget report and how wonderful it was that they suddenly decided to act in May. They acted in May because their opinion poll ratings were falling through the floor and they were losing a by-election.
We can all impute motives to others, but the record says that, when we discussed with the Government what they might do, we all expected no statement until November. The statement is not complete as it is, and we are pressing the Government further
today, but I merely record the events. There was an anger that I have not seen on our Benches before and a willingness to ensure that the Government brought forward measures to compensate the poor. There was no campaign on this sideonly a couple of e-mailsbut Labour Members felt intensely strongly about the issue.
We have two options before us tonight. We are waiting for my right hon. Friend the Financial Secretary to say what the Government intend to do and whether she will give us the promise that we require. If she cannot go the whole hog tonight and we are not satisfied, we have new clause 20. We will also have the pre-Budget statement itself. If enough of us feel at that stage that the Government have not fulfilled the promise that we thought that they were making to our poorest constituents, a motion will be tabled. I cannot believe that if those on the Labour Benches again make their views known, the Opposition will not try to exploit that by giving us time to debate the subject. However, that motion will be debated in our name and we will not follow what the Opposition ask us to do in the Lobby.
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