Finance (No. 4) Bill

Brandon Lewis Excerpts

Thursday 19th April 2012 Commons Chamber

[Brandon Lewis (Great Yarmouth) (Con)]

Putting aside the fact that people on incomes such as my hon. Friend the Member for Redcar (Ian Swales) mentioned would pay zero in tax, which makes the hon. Lady’s argument purely academic at best, is it not true that she is referring to the same group of people who have just had the biggest ever increase in their pension? That is much different from the previous Labour Government’s 75p insult.

[Rachel Reeves]

The people who will be hit by this tax are those who have an income in retirement of between £10,500 and £25,000 a year. They will pay tax at 20% on any income over £10,500 a year. That is why 4.4 million pensioners will lose out by an average of £83 next year. People retiring next year will lose out by up to £322. That is the reality of the change that we will vote on this afternoon.

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[Rachel Reeves]

No. Cuts to vital services such as the NHS and to social care and local transport also hit pensioners hard on top of the increases in VAT and the cuts to their pensions.

Many of the worst cuts are still to come. Analysis of the 2010 spending review showed that, on average, pensioner couples would be hit hard by cuts to services, amounting to £1,275 a year or 6% of their household income, while single pensioners stood to lose services worth £1,300 a year or 11% of their income. As we heard from the Treasury Committee yesterday, many pensioners are also paying a price for the Government’s failure to get the economy moving because the Government are relying on the Bank of England to undertake more quantitative easing to prevent the economy from sinking deeper into recession. That means that annuity rates and returns on pensioners’ savings are lower than they would otherwise be.

[Brandon Lewis]

The hon. Lady referred to the increase in the pensioners’ allowance and linked it to inflation. How high would the Labour Government have moved it in the current circumstances of inflation? How would they have paid for that with council tax rises elsewhere?

[Rachel Reeves]

I return to my earlier point: if inflation was 10% and pensioners got a £10 increase in their pension, would Government Members celebrate and say that that was huge largesse for pensioners? It is not; it just keeps pace with the cost of living. The increase in VAT, and the increases in gas and electricity prices, which the Government have done nothing to tackle, and the rise in petrol prices, mean that the cost of living for pensioners and other families has increased enormously because of the Government’s choices.

There is a further hit to pensioners’ incomes, buried in the detail of the Budget documents. This year, an estimated 300,000 pensioners stand to lose their savings credit, while others stand to lose as much as £276 a year as a result of reduced rates of savings credit. Under the Chancellor’s latest plans, the savings credit will be abolished completely, costing more than 100,000 new pensioners as much as £897 a year: another stealth tax that the Chancellor tried to slip past pensioners; another slice taken from the constrained budgets of ordinary families.

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[Brandon Lewis]

I supported the Budget a couple of weeks ago and I still do now. It is important to look at it in its entirety, and at how it fits in with other things that are going on. At the moment, an increase in personal allowance is being put in place; it will rise by £1,100 in April 2013, taking it to £9,205 in total. That is the largest real personal tax cut for the median earner in more than a decade, from which 24 million people will benefit. It will give basic rate taxpayers a real cash gain. The Government are taking 2 million low-paid workers out of tax altogether.

Let me put that increase in local context as the Member of Parliament for Great Yarmouth. It lifts an additional 75,000 people in the east of England out of income tax altogether. That will have a dramatic impact on many low earners in my constituency, which is the 54th-most deprived local authority out of 326. The average earnings in Great Yarmouth are £21,900 per annum, compared with the national average of £26,100.

[Mr Iain McKenzie (Inverclyde) (Lab)]

Does the hon. Gentleman agree that to benefit from this increase in the tax threshold one first needs to have a job? That is what most of my constituents are asking for—a job.

[Brandon Lewis]

I thank the hon. Gentleman for that intervention, which gives me a chance to highlight the good news we had this week regarding the number of people in employment. In Great Yarmouth we saw not only an increase in employment this month, which is very welcome, but an increase in the number of young people in employment. That is a testament to the work the Government are doing, and also, I hope, a sign of the improvements that are coming. It is also a testament to the opportunities put in place through the previous Budget and the work of the Department for Work and Pensions, particularly on work experience and the Work programme, which is also having an impact.

In Great Yarmouth, we also have a particularly high number of part-time and seasonal workers due to the nature of the constituency and its tourism industry. The change in personal allowance is a huge help to that sector of the local work force. It puts extra money into the pockets of hard-working families across my constituency.

[Fiona O'Donnell]

I am sure that the hon. Gentleman is going to talk about the age allowance at any moment. Has he considered its impact on his local economy? That money was not being spent on skiing trips or foreign holidays; it is money that would, in the main, be spent in the local economy.

[Brandon Lewis]

The hon. Lady has just made a very good argument for cutting taxes and increasing the personal allowance, which is exactly what this Government are doing. The reason why I have chosen to talk about particular issues is that I agree with something my hon. Friend the Member for Stourbridge (Margot James) said a moment ago. Pensioners in my constituency are often concerned about the future for their family—their children and their grandchildren. The work this Government have done has put in place changes, enterprise zones and opportunities for people to increase jobs, as we have seen this month, so there is a real opportunity for people in future.

We must also take into account something else. In Great Yarmouth, a prediction listed by our local health teams in the past few years is that our pensioner group will increase by 35% in the next 15 years. That is a huge increase. I fully agree with my hon. Friend the Member for Ipswich (Ben Gummer) that we have to ensure that this country can provide for people in their pensionable years in future. As we face such an increase in the number of such people, the Government must take the decisions that mean we can provide a good and fair opportunity for the future of all pensioners. That is why I also appreciate the Government’s work to move towards a fair and straight flat-rate pension for pensioners in future, on which I congratulate them. The work done in the last two Budgets will make that possible. It will mean that our economy can move forward and that we can make fair and proper provision for people in various age groups.

As the personal allowance for all people, including under-65s who work hard, increases, there will be an impact on pensioners in future. The changes announced in the Budget that simplify the tax system make it clear that there will eventually be a flat, fair and generous rate of allowance for all people. As Opposition Members have admitted, that means that nobody has a cash loss at all. In fact, pensioners under this Government had the biggest increase in their basic state pension ever seen. More than 5 million of the poorest pensioners are unaffected thanks to the triple lock. All pensioners are therefore better off and will receive the biggest ever increase of £5.30 a week. In 2013, they will receive £130 more than they would have received under the previous Government’s plans. Pensioners will respect this Government for that and appreciate the Government’s credibility for putting together a solid economic base to allow it to happen.

That is why the measure should be looked at as a whole, particularly for an area such as Great Yarmouth, where we have a high proportion of pensioners. We must make sure that we can provide for them properly and fairly in the future, and also that the economy can create jobs for their families and increase our economic growth. Being in government is about making tough decisions. Those must be the right decisions, and that is what being in government is about. As we heard today from those on the Opposition Front Bench, opposition is often about opportunism, not about making right or proper decisions.

[Alison McGovern]

I shall make a few remarks about an important impact of the changes, which is at risk of going unrecognised. I think of that as the cluster impact of the changes. Our country does not have the same kind of people distributed uniformly across the United Kingdom. People of different ages cluster in different areas.

I am deeply proud to represent the Wirral, not least because the area has a higher proportion of older people. It is a great strength of our area. They bring a large amount of expertise and stability, and we should not talk about people living longer as though it was a negative thing. I benefited from having grandparents who lived longer than they might have expected, and I cherished each of those relationships.

With that clustering of older people comes a responsibility to pay attention to the issues that affect them. Even if that was not the right thing to do in and of itself, our local economy in Wirral is highly dependent on the income of pensioners. We have many small independent businesses whose relationship with their customers is important. They have regulars of many years’ standing, and many of those people are retired and on a fixed income, so even if it was not the case that we should care about the needs of older people, the employment of the rest of us in the Wirral and the vitality of some of the local shops is related to the income of older people.

Before I deal with the clustering of the local economy and the attention that Ministers must pay to how our economy works in practice, I want to make a few points about longevity and the increase in life expectancy that we are seeing. We must recognise that this is not a uniform phenomenon. Not everybody in our country is living longer in the same way. There is a social justice element. Poverty is still a pretty strong determinant of the length of people’s life. People such as those in my constituency who have worked in manufacturing might not expect to live as long as those in relatively more affluent parts of the country. My constituency is very mixed, and there are people there who may not be able to expect to live longer as the average increases. That average masks different expectations.

When Treasury Ministers make decisions about, for example, age-related allowances, I ask them to find out how those will impact on different parts of the country and different groups of people. The impact will not be uniform. We are not all uniformly living longer in exactly the same way. The NHS is a wonderful thing, but we still have a heck of a long way to go on public health to make sure that poverty does not limit people’s life expectancy, as it has done in the past and still does.

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[Graham Evans]

As a father of three young children, I realise that we are all in this together, and we need to make those sacrifices. The Government’s maximum benefit cap of £26,000 is all to do with that.

[Brandon Lewis]

Following on from the intervention about growth and families, since the Budget one company in Great Yarmouth has made an acquisition and an investment of hundreds of millions of pounds that will create more jobs. Another company, Seajacks, has received investment from a Japanese company of hundreds of millions of pounds, which will allow expansion and create more jobs, which will help those families who need that money and families of pensioners. Does my hon. Friend agree that that sort of work in the Budget, which facilitates such growth, will move our country forward and ensure that we get out of the mess that we inherited from the previous Government?

[Graham Evans]

Absolutely; I am most grateful to my hon. Friend for that contribution. At the end of the day, the Budget tells the world that this country is open for business because private sector investment and wealth creation through businesses such as those that my hon. Friend mentioned are critical to the success of the whole nation, not just young people and hard-working families, but pensioners.

Thanks to measures such as the clamp-down on tax loopholes, the very rich will pay more. There is an ideological divide: the Labour party wants the rich to pay symbolically higher rates of tax; the Budget ensures that the rich actually pay more tax. Her Majesty’s Revenue and Customs and the independent Office for Budget Responsibility agree that the 50% rate raises next to nothing. Indeed, having a higher income tax rate than communist China indirectly reduces tax revenues as it fundamentally undermines the competitiveness of the UK economy, discouraging inward investment and risking a brain drain of our brightest talent.

[Graham Evans]

The hon. Lady makes a valuable point. I have huge respect for her and for everything she has done on child poverty, but if the 50% tax rate was so important to right hon. and hon. Members of the Opposition, why did the Labour Government introduce it only a month before a general election? Why did they not introduce it in 1997, 1998, 1999 or any of those 13 years? They left it until their last month.

[Brandon Lewis]

Bearing in mind what the hon. Member for Stretford and Urmston (Kate Green) said, was my hon. Friend as surprised as I was yesterday when we voted on a Labour new clause that would have cut the rate to 40%?

[Graham Evans]

My hon. Friend makes a good point, which the Prime Minister made yesterday at the Dispatch Box.