The Economy
Charlie Elphicke Excerpts(12 years, 5 months ago)
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Ed Balls
I think that the bibulous parties might be starting in the morning, Mr Deputy Speaker. The euro is not succeeding as a single currency, which is why we were right not to join in 2003. There is no possibility of a British Government joining the euro at any time in my lifetime.
Charlie Elphicke (Dover) (Con)
Given that the shadow Chancellor seems to be making up policy on the hoof in this debate, is it any surprise that one shadow Cabinet colleague has said that his policy is hurting but not working, and that he has no credibility?
Charlie Elphicke
The shadow Chancellor talks about my constituency, but let me talk about his. How does he account for the rise in the claimant count in his constituency of 1,056, or 141%, in the last Parliament? Was that an economic success?
Ed Balls
If the hon. Gentleman is quoting the figures for this year, they might be the result of the Chancellor’s policies. Let me return to concerns about Dover and Deal. While campaigning for a new hospital in Dover, the hon. Gentleman said:
“I am very, very concerned that Dover has not had and does not get its fair share of health care. I have taken this up with ministers and hammered home just how angry people are”.
Perhaps he should also hammer home with his Front Bench the failure of cuts in tax credits.
In last week’s statement, in today’s debate and in every interview the Chancellor has given, we hear him give excuse after excuse and blame anyone except himself. Earlier in the year he blamed the snow, the earthquake, the royal wedding and higher oil prices. America was badly affected by the snow, and every country was affected by the Japanese earthquake and higher commodity and oil prices, so why did Britain have slower growth than any other country in the G7 except Japan? Why do we have higher inflation than any other country except Estonia? It was the Chancellor’s decision to raise VAT in January that pushed up fuel and petrol prices, hit confidence and reduced real living standards for families. He then blamed the euro crisis, but the fact is that our economic recovery was choked off a year ago, well before the recent crisis.
The Office for Budget Responsibility has downgraded its growth forecast for Britain in 2011, but it has upgraded its growth forecast for the euro area. Only Greece, Portugal, Denmark, Cyprus and Slovenia have grown more slowly than Britain over the past year. As the OBR figures show, the fact is that it is the lack of domestic demand that has slowed down our economy. It is only net trade, the contribution of exports, that has kept us out of recession over the past year. If the eurozone countries fail to sort out their problems, that will of course have an impact, which is why it is important that they are sorted out. Far from the eurozone dragging us down this year, it is actually the euro that has been buoying us up.
John Stevenson (Carlisle) (Con)
It is a pleasure to have the opportunity to participate in the debate. I appreciate that it is primarily concerned with the state of the economy at present, and I accept the reality that the economy is likely to dominate our debate and politics for the next few years as we concentrate on improving it and trying to achieve some growth. However, as this is a general debate I thought I would take a slightly different approach. In the short time that I have, I wish to consider what sort of economy I would like to see in the next five or 10 years, and what sort of economy we should aspire to.
Members of all parties want a rich and growing economy that provides quality public services and well-paid jobs. That is clearly our ultimate goal. We therefore need to consider matters such as: the balance between the public and private sector; what level of taxes we should have and what those taxes should be; how much regulation there should be and what we should be regulating; what industries the Government should support and encourage; what the relationship should be between central and local government on economic policy; and what policies on education, training and the like will best support a growing economy. Those are all very big issues in their own right, but I shall concentrate on three general themes.
My first theme is the public sector. The critical starting point for me is that government, whether it be national or local, can and should be a vehicle for good. However, the danger of government being a hindrance is all too obvious. It can become too big, acquire too much debt and an oversize deficit that crowds out wealth-creating sectors, and introduce too much regulation, strangling any innovation. Probably worst of all, officialdom and bureaucracy can become all-powerful and interfering. That has happened to some extent over the past few years, and it is this Government’s job to try to reverse it.
It is vital that over the next few years, we start to rebalance things. I accept that the state has an important role to play, but it should be smaller and more efficient. Government should not try to do everything, it should try to do some things extremely well, particularly the things that the private sector cannot do. The state sector needs to raise its productivity levels, and we must always remember that it is not always about the amount of money that is spent, it is also about how we spend it. We need to create a competitive environment within the public sector wherever possible, and most importantly of all we need to encourage clear leadership and quality management, to maximise freedoms in the public sector so that leaders and managers can perform their jobs to the best of their ability and as efficiently as possible. Those overriding concepts can lead to a much more productive and effective public sector providing better services for the people of this country.
We also have the wealth-creating sector, which must also be a vehicle for good, creating jobs and wealth for our country. Our goal should be to create an environment in which the private sector can flourish, with a sensible tax regime and an appropriate regulatory regime. We need consistent Government policy so that business can plan for the future, and we need to ensure that the Government’s finances are stable. That should be their aim.
We need a balanced economy, but at the same time we must recognise that we have certain strengths as a country, for instance our financial sector, and should play to those strengths where appropriate. The key is to ensure that we have a competitive environment and a skilled and educated work force. Wherever possible, we need to ensure that barriers to entry are kept to a minimum. The prime example is the banking sector, in which organisations are too few and too big. Indeed, we could go on and criticise the accountancy world, in which we have four very large firms. Are they also too big and too few? There is work to be done over the next few years in helping our economy rebalance, creating the right environment for business to grow and ensuring that we have a skilled and educated work force and a competitive market for businesses to compete in.
The final key area on which I wish to reflect is how Britain made its fortune in the past, which was through trade. We are a trading nation and a very open economy, but we appear not to have performed as well as we should. We have a deficit of £100 billion in the trade in goods, so there is clearly a problem. Some 50% of our trade is with Europe, and our main trading partner is Ireland. What about the BRIC countries—Brazil, Russia, India and China? Ten years ago they represented 8% of the world’s GDP. It is now 20%, yet we have only £2 billion-worth of trade with Brazil.
Charlie Elphicke
Does my hon. Friend agree that a key Government priority should be to boost trade with BRIC countries so that we can diversify our economic base internationally?
John Stevenson
I completely agree. Growth is not in Europe but elsewhere in the world, and we should try to increase our trade with the BRIC countries. We need to look at those new markets and rediscover our trading instincts.
I accept that our concern is primarily the state of the economy here and now and in the next 12 months. However, we need to remember to raise our eyes above the horizon and think about what kind of economy we aspire to in five or 10 years’ time, and how we will create it.
Charlie Elphicke (Dover) (Con)
I am pleased to be the first to welcome you to the Chair, Madam Deputy Speaker. I want to make a few remarks about economic impacts on the households and families that find it the hardest to make ends meet. Some call them the strivers; some call them hard-pressed families; I have even heard them talked about as alarm-clock Britons. Many families with children find it very hard to make ends meet, so it is worth underlining the strong action that the Government have taken to help people in that position.
First and most important of all is keeping interest rates low. I noted with interest the intervention of the shadow Chancellor on the Chancellor to point out, “Well, there is a liquidity trap; interest rates are too low; it is a bad sign; we need higher interest rates.” I think that that will ring very poorly with Britain as a whole. For people who are striving and finding it hard to make ends meet, having to pay higher mortgage interest is not in their interest. The shadow Chancellor and the Labour party are wrong if they are entertaining a policy that is about raising interest rates. That was my understanding of the drift of the shadow Chancellor’s speech. I regret it; I do not think it is the right thing to do. Let us bear in mind that a 1% hike in interest rates would mean £10 billion more in interest payments—about £1,000 extra on the average mortgage. People are finding it hard to make ends meet because of rising global commodity prices and the current difficult situation. Higher mortgage interest rates would be a massively retrograde step. One of this Government’s most important achievements has been to keep interest rates low by providing stability, clarity and a positive deficit reduction plan to get our finances in order. That is helping millions of families up and down the country and millions of businesses with lower interest rates are far better off than they would be otherwise.
The other really important thing is the help the Government are providing with child care. For a long time it has been difficult, particularly in deprived communities like parts of Dover and Deal in my constituency, for joint working parents to juggle child care. The announcement to help those deprived areas with extra help for child care places was one of the most important in the autumn statement.
Sheila Gilmore
At the same time the Government reduced the amount of child care tax credit last year, so far from helping working families, that did exactly the opposite. These provisions for nursery care, though important, are not really a substitute for the kind of costs people face if they want to work.
Charlie Elphicke
I thought that child care tax credits had been protected. Indeed, I believe they are going up £135 next year, so I am not sure that the hon. Lady has that right.
Sheila Gilmore
Like others who have spoken today, the hon. Gentleman is confusing several different issues. The purpose of child care tax credits is to pay the cost of child care. The Government reduced the proportion of the cost that was paid from 80% to 70%. Child tax credits are a completely different entity, and yes, they are being increased. Earlier, the hon. Member for Bristol West (Stephen Williams) suggested that tax credits had not been frozen, but they have been, and that is another hit suffered by working families. It would help if Government Members understood more about the benefit and tax credit system.
Charlie Elphicke
As the hon. Lady well knows, she and I debated the issue at length during the Committee stage of the Welfare Reform Bill. I know that Opposition Members sneer at this, but I think it important that child tax credits are rising by £135 next year. That is a move in the right direction. It is good that the lowest paid in the public sector are being protected from the pay freeze because they are disproportionately women, just as it is good that 1 million people are being taken out of the income tax system because they are disproportionately women. We need more action of that kind. The hon. Lady’s party had 13 years in which to take such action, but, as we know, child poverty sky-rocketed during the last Parliament. At least this Government are trying to take positive action in difficult times.
Hard-working families need to see stable finances, a stable Government and a stable fiscal position, because that is the only way in which we will bring back real growth. If we had continued to pursue the policies of the past, what would have happened to our country? We would have ended up as a basket case, like Greece, Italy, Portugal and Ireland. However, we had a credible plan, and we took firm action to control the deficit and sort out our national finances. We have made tough decisions that hit the least well-off, but also the most well-off. We are all in it together. Everyone is sharing the pain, more or less equally, and I think that that is the right direction of travel for the Government.
Members on the rowdy Opposition Back Bench may not agree with what I am saying, but the figures make it clear to me that we are working to create fairness. For instance, unlike the Opposition, we want to create fairness for motorists. By the end of next year, those who experienced such difficulty as a result of Labour’s fuel duty escalator will save £144 on the cost of filling up the average car by the end of next year. That is an important example of progress. The apprenticeship scheme has also been a real help to our young people after youth unemployment rocketed, particularly under the last Labour Government. [Interruption.]
Madam Deputy Speaker (Dawn Primarolo)
Order. Members do not have to agree with what is being said, but they do have to listen to it, and not continually interrupt.
Charlie Elphicke
Thank you, Madam Deputy Speaker.
In the last Parliament, youth unemployment in the shadow Chancellor’s constituency rose by approaching 150%, whereas in the current Parliament the rise has been much lower. We are having to try to turn around the supertanker to return to our young people the futures that were so disappointingly taken from them by the last Government. We need to look after the younger generation, and allow them hope for a better future.
Let me end by saying a little about what the Government are doing for east Kent. The South East England Development Agency spent £20 million on a business park project and created tarmac, but no buildings and no business park. Money was too often wasted. Now we have a local enterprise partnership that has already created an enterprise zone, which is important to a community that experienced difficulties after Pfizer decided to run down its research in the United Kingdom. That is real progress.
Our area has benefited from massive activism. The fast train service to Deal and Sandwich will help to improve the economic situation, as will the £40 million regional growth fund. I also welcome the £180 million catalyst fund that the Prime Minister announced the other day. Such things are very important. We have seen more economic activism in east Kent in the last year than we have seen in the last decade.
If we can establish the people’s port in Dover, it will give the community a sense of ownership, place and control of their destiny which will have an important impact on their confidence in us. East Kent is so often at the end of the line, a poor relation of the rest of Kent. I hope we can establish the people’s port project, and make it work so that it is a great showcase. If we make it a success, we will be able to hand back confidence and the idea of building a future, and thereby regenerate Dover, making it every bit as good as it can be so that it is once again a jewel in the crown of the nation.
Looking across the piece at what we are doing both nationally and locally in Dover and Deal, we can see that the Government have the right policies at the right time. They are making the difficult decisions that will pay off for us over the next decade or so.
David Rutley (Macclesfield) (Con)
It is an honour to follow the hon. Member for Middlesbrough South and East Cleveland (Tom Blenkinsop), a member of the “rowdy” Bench, perhaps better known as Snow White and what were four grumpy Members.
In the current economic climate rebalancing the economy is a critical task, and I am pleased that the Government are taking urgent action in this direction. We need to create the conditions in which sectors vital to the nation’s growth have the best possible chance of success. Yesterday’s launch of the UK’s strategy for life sciences was an important step in improving the competitiveness of life sciences and pharmaceuticals, which are vital to the UK and to the local economy in Macclesfield, where AstraZeneca employs some 2,000 people. Across the country, those sectors employ about 160,000 people and have a combined turnover of roughly £50 billion.
The launch set out important positive policies for the life sciences sector: it will create new research partnerships with companies such as AstraZeneca to cut the time between the development of new treatments and their application; it will introduce a £180 million catalyst fund for the most promising medical treatments; it will reduce the time for the first recruitment of patients for clinical trials to 70 days from a staggering 600 days; it will ensure that medicines approved by the National Institute for Health and Clinical Excellence are automatically approved for use in hospitals; and it will establish an early access scheme that will allow thousands of seriously ill patients to get access to cutting-edge drugs up to a year earlier than they can now. Those steps will not only help to reaffirm the competitiveness of the UK’s life sciences industry, but will encourage major pharmaceutical businesses to stay based in the UK and materially help to rebalance the economy. But the approach goes further, because it will enable patients who have simply been waiting for far too long for new medicines to get them earlier. The Government are absolutely right to tackle that unacceptable situation.
Our approach is not just about rebalancing the economy, because we need to rebalance our skills set too. There has never been a more important time to prepare a generation of young men and women for a future in business and enterprise.
Charlie Elphicke
Does my hon. Friend agree that apprenticeships have been a real step forward and have made a massive difference to our young people?
David Rutley
I completely agree with my hon. Friend, and I will come on to talk about the impact in Macclesfield, and no doubt in Dover too. Apprenticeships have been a phenomenal step forward.
A crucial priority for us now is getting to grips with reshaping the life chances of millions of young people and helping to improve the long-term economic prospects of the United Kingdom. There is clearly a lot to do. A recent survey of 3,000 parents with children aged 11 and under found that the top career aspirations for their children were: first, being a sports star; secondly, being a pop star; and thirdly, being an actor or actress. Going into business did not even feature in the top 10. More worryingly, those aspirations are increasingly reflected in the subject choices in school, with business-related subjects lagging far behind in the popularity stakes.
Autumn Statement
Charlie Elphicke Excerpts(12 years, 5 months ago)
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Mr Osborne
Of course people who work in the public sector pay taxes and make an enormous contribution to the British economy, but the hon. Lady should recognise that public sector pay restraint and pension reform at a time such as this is one of the ways in which we can reduce the impact of the very large deficit that her Government ran up on the public sector work force.
Charlie Elphicke (Dover) (Con)
I give a wholehearted welcome to the announcement concerning the lower Thames crossing, which will make a big difference to Kent, as will the massive help for small business finance. May I make a plea to the Chancellor to look further at small business equity finance? In particular, will he consider whether there is scope for expanding, or possibly floating, the business growth fund?
Mr Osborne
I am very happy to look at ideas to enhance the business growth fund, which is principally operated by the banks, under which they have committed to invest in the equity of small companies. We have already announced the seed enterprise investment scheme, which will help angel investments in companies. I am glad that my hon. Friend supports the commitment that we made to the new crossing at the lower Thames.
Taxation Freedom Day Bill
Charlie Elphicke Excerpts(12 years, 5 months ago)
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Mr Hollobone
I am most grateful for that intervention. I think that the answer is yes. One would have to access the Tax Buster website to find out how to do so. I think that the app is available for all kinds of cellphone technology. I know that my hon. Friend has the very latest gadget.
When an individual puts into the app a few details about their purchase, it tells them how much they had to earn before they paid taxes to have enough money to buy the product. For example, 20 cigarettes that cost £6.49 would have cost £1.24 without indirect taxes. Paying the £6.49—I am looking at my hon. Friend the Member for Dover (Charlie Elphicke), who I believe might occasionally buy the odd cigarette—requires earnings of £11.35 before income and corporate taxes.
Charlie Elphicke (Dover) (Con)
I would like to put it on the record that I share wholeheartedly my hon. Friend’s concern that cigarettes are over-taxed. That is a clear case for reform, which I hope Treasury Ministers will take on board.
Mr Hollobone
I am most grateful for that helpful intervention.
My next point will be of interest to my hon. Friend the Member for Harlow. Filling the car with £60-worth of petrol would cost only £23.86 without indirect taxes. Paying that £60 requires £104.84 in earnings before income and corporate taxes. For higher rate taxpayers, the equivalent figure is £122.91.
Mr Hollobone
It does rather put it into perspective, does it not? I shall not be led too far astray, Mr Deputy Speaker, but I cannot resist adding to the strength of my hon. Friend’s point. Our bill to the EU for the last five years of the previous Government was £19 billion, but in the lifetime of the coalition Government to 2015 it is set to be £41 billion. It will more than double.
Charlie Elphicke
May I suggest one saving that could be made to help fund the cost of these regulations? The excellent TaxPayers Alliance recently published a document showing that we could save £113 million by getting rid of all the full-time paid union officials, which would also enable people to work more effectively.
Mr Hollobone
That is right. That so-called facility time is of huge concern to taxpayers up and down the land. [Interruption.] I know that this point exercises some Labour Members, and I can understand their concern —they have their views—but the Bill is a transparency exercise, so those, like Labour Members, who believe in facility time and recognise its value will have no problem recognising that that facility time, which costs hundreds of millions of pounds, will shift taxation freedom day. They can argue the benefits of facility time to the British taxpayer. I happen to disagree with facility time because I do not think that public money should be spent on such things, but I recognise that there are views on the other side. My Bill does not state whether such spending is good or bad; it simply tries to demonstrate its effect on the public purse. That is why I hope that Members on both sides of the House will support the Bill on Second Reading.
My Bill is a small Bill—it does not even run to two pages—it is concise and it proposes the establishment of a simple and straightforward mechanism to let British taxpayers know how much of their money goes each year to Her Majesty’s Government through all the different burdens of taxation. It is not just about income tax or national insurance contributions; it tries to add up the total burden of taxation on every man, woman and child in the country. There is a need for transparency, because a particularly enthused member of the public who was trying to work out the burden of taxation might, for example, go to the Finance Bill, which is typically more than 500 pages long, with hundreds of different clauses, or one of the Budget reports, with its supporting documentation, which also run to hundreds of pages, containing huge amounts of detail. However, a taxation freedom day—a calendar point each year that simply illustrated the burden of taxation—would be a lot more readily understood.
Importantly, a taxation freedom day would also help to expose the increasing burden of stealth taxes on our economy. It is all very well concentrating on the headline rates of income tax, the thresholds at which they kick in or national insurance contributions, but as we have seen over the last decade, one of the big increases has been in stealth taxes, particularly council tax, in the hope that the British public would not spot that. However, by having an effect on taxation freedom day, the burden of stealth taxation on our economy could also be exposed.
In closing, I would like to stress that my Bill is politically neutral. It is an attempt to make our country’s taxation system more transparent, in a way that, crucially, every individual in the land would readily and easily understand. I very much hope that my hon. Friend the Minister has been persuaded by the power of my arguments and that she will confirm that the Government will support the Bill, because there is enough time in the current Session for it to complete its passage.
Philip Davies
My hon. Friend makes a good point. According to the document I have with me, Greece’s tax freedom day is 12 June. Whether that was simply an academic exercise rather than a real one, I am not entirely sure. I probably share my hon. Friend’s implied view that, for far too many Greeks, tax freedom day was 1 January. I am not advocating that this Government aim for a 1 January tax freedom day, but I am sure they can do better than they are at the moment—on the best analysis I have seen, the middle of May or what we think is actually the end of May.
Charlie Elphicke
Is not a central point about tax freedom days in relation to Greece the need to avoid the risk of creative accounting? We must be sure that accounts are accurate, especially where there has been a change of Government. I believe that the Labour party has so far spent its bank tax nine or 10 times over. We must ensure that, whatever happens, there will be no creative accounting; we must be able to trust the figures.
Philip Davies
My hon. Friend is right, and I believe that the Bill will provide a good safeguard against Governments exercising sleight of hand in their presentation of figures. If we have an independent body—I do not really care whether it is the Office for National Statistics, which is mentioned in the Bill, or the Office for Budget Responsibility—and a set of figures that can be trusted, no matter how many times the Government announce the same tax increases or tax cuts, we would at least know where we stood as we would have trusted figures that overrode the spin. I think that the Bill is a particularly good safeguard against that.
The Adam Smith Institute has been on to this for quite some time, and has helpfully informed people when tax freedom day falls in this country. Although the transparency element is important, what I find most striking is the fact that British people must work for 149 days just to pay their taxes. I was also interested by the regional variations mentioned by my hon. Friend. The Welsh, for instance, spend 35 days paying their income tax, while people in London spend 51 days paying theirs.
I do not understand why the Government do not want to make people aware of how difficult the Government’s financial position is. The Adam Smith Institute used a tax freedom day-style mechanism to illustrate the extent of the United Kingdom’s debt problem. It calculated that our burden of debt was so great that UK taxpayers would need to work for nearly a year and a half, with their entire wage packet going to the Government and not a penny being spent on public services, just to pay off the national debt.
When the Government talks of our being heavily in debt, whether they are telling us that we are adding £150 billion a year to our debt or that the debt burden is more than £1 trillion, it is difficult for people to get their heads around the figures. Millions used to sound like a lot of money, but nowadays no one is interested unless it is billions. Explaining to people in simple terms that they would have to pay tax for a year and a half without any of it being spent on public services would make the extent of the debt clear to them.
We could also be shown a way out of our financial problems. Sam Bowman, head of research at the Adam Smith Institute, says:
“Tax Freedom Day underlines the huge burden of government on working people’s lives. For five months of the year, we are slaves to the state. No wonder growth is so slow—we need robust tax reform now, bringing lower, simpler, flatter taxes. The government should resolve to make Tax Freedom Day something we can celebrate earlier and earlier each year.”
I think that Sam Bowman is on to something. When we can see the facts for ourselves, when we worry about where growth in the economy will come from and conclude that it depends on people having more and more disposable income so that they can go to the shops and buy things—thus helping businesses—and when we are made aware of how long people are having to work just to pay their taxes without even having a disposable income, the way out of our debt problem begins to become clear. If we can indeed make tax freedom day arrive earlier and earlier, people will have more and more disposable income that they can use to try to get the economy going. I think that that would help the Government to see a way towards economic growth, which is what will solve our debt problem—together with, I hope, a cut in Government expenditure at some point. They do not seem to have been able to manage that so far.
Let me draw my hon. Friend’s attention to the position in other parts of the world, particularly America. Traditionally, America has been far better at generating economic growth than the wretched European Union ever has. This year, tax freedom day in the United States will arrive on 12 April, well over a month before it arrives in this country. Whereas in this country people must work for 149 days just to pay their taxes, in America they need work for only 102. Many of my constituents would much rather work for 102 days than 149.
The great recession has reduced tax collections even faster than it has reduced income. After a long debate, President Obama and the Congress extended the Bush-era tax cuts for two additional years, which is very welcome. Despite those tax reductions, Americans will pay more in taxes in 2011 than they will spend on groceries, clothing and shelter combined, despite the fact that tax freedom day falls much earlier in America.
The statistics in America are calculated by state—my hon. Friend the Member for Kettering gave figures for different parts of the UK—and they are very revealing. Mississippi has the lowest average tax burden of all the states, and its tax freedom day falls as early as 26 March, whereas in Connecticut it falls on 2 May and in New Jersey it falls on 29 April. There are massive regional variations, therefore, and drawing comparisons can serve to promote competition between states. If voters in America can see how their state compares with other states, they might be encouraged to say, for instance, “Well, hold on a minute; if Mississippi can have tax freedom day on 26 March, why can’t we have that in Connecticut, too?”
One of the best ways to get Governments to reduce the tax burden is to introduce an element of competition. That is why I want the Bill’s provisions to be strengthened so that we encourage the Government to set out in the calculations how the UK compares with other countries in respect of a tax freedom day, and in particular how we compare with countries such as America whose economic growth has traditionally been stronger than ours. After all, if we want to grow the economy, we should want to adopt best practice. Any business that wants to improve its performance will look at what its competitors do. That is how most organisations seek to improve; they benchmark their own performance against that of similar organisations to see what they might do better. I would like the Government to start doing that in respect of taxation rates. If they are forced both to show that lower taxes can be delivered in other parts of the world and to consider how those countries achieve that, they might then try to introduce a similar discipline and focus to this country.
Mr Nuttall
Yes; in view of recent publicity I am sure that all Government Ministers will want to make announcements to the House first.
The purpose of tax freedom day is set out clearly in clause 1(2), as being to mark the day in each year when
“the United Kingdom’s net national income (calculated from the beginning of the calendar year) reaches the level of the United Kingdom’s estimated level of national taxation for that calendar year.”
At this point the whole matter becomes more complicated. The term “total national taxation” is helpfully defined in clause 1(3) as including
“all forms of direct, indirect and local taxation”,
and as my hon. Friend the Member for Kettering mentioned, the task of making this calculation is given over to the Office for National Statistics. However, the problem with that approach is that very few people’s personal tax freedom day would actually coincide with the day specified under the Bill. Levels of council tax vary throughout the country and dwellings are divided into several bands within council tax. It seems to me that in this age of personalisation of services, the Bill could usefully go on to provide for the notification to each individual taxpayer of their personal tax freedom day.
That is not a new idea. In Canada, the Fraser Institute provides a personal tax freedom day calculator which takes into account variables such as the age of the head of the household, their marital status and the number of children they have. I wonder whether the TaxPayers Alliance app for mobile telephones and tablet computers that my hon. Friend mentioned earlier could be adapted to provide a personal tax freedom day for individuals.
What about so-called non-taxpayers? I am always mystified by the term “non-taxpayer”. I accept that there are people who, for various reasons, might not pay income tax, and thanks to the steps that this Government are taking, fewer and fewer people are paying income tax. I am pleased that we are moving towards the target of a £10,000 personal allowance each year. That is a huge improvement in the field of tax simplification and it has meant, for example, that this year’s £1,000 increase in the personal allowance has removed an additional 800,000 people from the burden of paying income tax.
However, we should not fall into the trap of thinking that those who do not pay income tax are non-taxpayers. They could still be liable for council tax. They may still have to pay insurance premium tax. If they travel, they will have to pay air passenger duty. Whenever they purchase goods or services that are liable for VAT, they will have to pay value added tax. The list goes on.
Charlie Elphicke
I thank my hon. Friend for giving way; he is being extremely generous in taking interventions. My own research has indicated to me that the effective tax rate on the least well-off in the past 10 years, under the previous Government, was higher than the effective tax rate on the richest. That is the inequality fostered under the previous Government.
Mr Nuttall
Yes, and we must not allow ourselves to think that people who are non-income tax payers are non-taxpayers. There is a great difference. They would, I suspect, be very surprised if the total tax liability from all the various forms of indirect taxation was calculated and expressed, as the Bill seeks to do in a general way for the nation, as their own personal tax freedom day.
We should ask ourselves why this approach to transparency has not been adopted before now by the Government and by previous Governments. The idea of a tax freedom day was developed decades ago in 1948, in the aftermath of world war two, when a Florida businessman who went by the great American name Dallas Hostetler trademarked the phrase “tax freedom day”. He proceeded to calculate it for the nation for the next two decades until he retired in 1971, when he transferred the trademark to the Tax Foundation, which ever since has continued to calculate the American tax freedom day. It is used as a mechanism for illustrating the proportion of national income that is diverted to fund the annual cost of Government programmes.
As my hon. Friend the Member for Shipley mentioned, since 1990 the Tax Foundation has been calculating a separate tax freedom day for each state. The concept of calculating a nation’s tax freedom day is enormously popular around the world. Dozens of countries produce their own calculations. There are too many, the House will be relieved to hear, for me to list individually. What is important for the purposes of comparison is for the calculations to be based on the same year. Fortunately, that can be done in the case of the European Union.
Last year a newspaper in Brussels entitled L’Anglophone compared the tax burdens for workers earning a typical wage in each of the 27 member states of the European Union. It took into account the income tax contributions and the social security contributions made by the employee and the employer, and included a projected value added tax contribution. From this research we see that the latest tax freedom day in one of the member states occurred in Hungary. It was 6 August, the 218th day of the year, representing a tax burden of an eye-watering 59.4%. The earliest tax freedom day in the EU was in Cyprus—this endorses the statistics produced by my hon. Friend—where it was calculated to be 13 March, or day 72, representing a tax burden of just 19.4%.
The importance of establishing a correct basis for calculation is perhaps best illustrated by looking at just one of those countries: Belgium. The accountancy firm PricewaterhouseCoopers calculated that for the second year running tax freedom day in Belgium fell on 8 June, whereas L’Anglophone research indicated that it fell almost two months later on 3 August, or day 215, representing a tax burden of 58.5%. The authors of L’Anglophone explained the discrepancy by noting that PricewaterhouseCoopers’s figures
“count revenue from all taxes (including those on corporate profits, petrol, cigarettes, &c.) and thus present a more complete picture of the country’s total tax burden.”
They added that it is
“an average applied to all Belgians—not all Belgian workers; in 2008, less than half of Belgium’s population (4.99 million working out of 10.67 million citizens) was legally working. Consequently, a huge share of Belgium’s tax burden is borne by the working population.”
That demonstrates the need for consensus around the world on an agreed formula for calculating tax freedom day, and I submit that that should be discussed and agreed at a future meeting of the G20. It also demonstrates the complexity of the tax involved and why for many people a personalised approached might be the way forward.
Another complication that would become apparent when comparing one year with another is the effect of a leap year. Indeed, next year will be affected, as 2012 is a leap year. It is worth noting that leap years have a slightly distorting effect on comparisons, to the extent of 1/366, or 0.27%.
I must deal with one of the major criticisms I have heard levelled at the idea of publishing a tax freedom day: the notion that that somehow devalues the importance of the work done by those engaged in public service. I do not accept that for one minute. I think that the British people are quite capable of recognising the need to pay our armed forces and police forces and all those who are essential public sector employees. The introduction of a taxation freedom day will provide citizens with a reminder of the amount of tax they pay and an opportunity to consider whether what they pay is reflected in the value of the public services they receive.
I have another concern, about the requirement set out in clause 1(2) stating that the UK’s net national income will be
“calculated from the beginning of the calendar year”.
I understand that the Adam Smith Institute calculates tax freedom day in that way. Indeed, having looked at the systems used around the world, it seems that calculating it from the start of the calendar year is the usual way. However, I suspect that that has arisen because in America the tax year is the same as the calendar year and, as the concept of tax freedom day started in America, that is what has been adopted in other countries.
Here in the United Kingdom, however, we of course run our tax year from 6 April, so I wonder whether it would not be simpler and easier to calculate the figures for notional income and the level of taxation on the same basis as the tax year, rather than the calendar year. Again, we could consider that in more detail in Committee.
The calculation period is particularly relevant when one considers the Chancellor of the Exchequer’s duties, which are set out in clause 2. The Chancellor will be required before the last day of November to estimate the taxation freedom day in the following calendar year, which will mean having to estimate the levels of taxation and spending for the following year before the annual Budget. The whole process might be better aligned with the annual Budget, however. Indeed, it could become a centrepiece of each year’s Budget, so that when the Chancellor made the annual statement he announced the annual tax freedom day.
It would of course be simple to base the calculation on the traditional tax year, and for the number of days required to be calculated on that basis. For example, if the 2011 Adam Smith Institute figure for the UK of 149 days—representing 40.8% of the year—had been calculated from 6 April, taxation freedom day would have been 1 September, and for the purposes of international comparison it could then, as it is now, be given as 30 May, the equivalent date from a 1 January start.
There is a further problem with calculating a national figure, and it arises in respect of Scotland. The Scottish Parliament now has limited tax-raising powers of its own, and if it exercised them it would lead to a distortion of the national figure. The existing power to increase income tax by 3p in the pound has not been used, but, when the new powers become available after the passage of the Scotland Bill, and with a Scottish National party Government in power in Scotland, they could be used, so a separate figure ought to be calculated for Scotland. It would not be fair or equitable for the UK Government to be criticised for spending decisions taken in Holyrood.
In conclusion, the Bill raises important issues about the levels of taxation and spending. Increased transparency in Government spending is vital, and I warmly welcome the measures that the Government have already taken to reveal the detail of public expenditure. Shining the searchlight of public scrutiny on the spending decisions of politicians is without doubt one of the best ways to control Government spending, and such moves help at the micro-level, but this Bill will extend the principle of public scrutiny, openness and transparency to the macro-level.
A single, simple day can be tracked each year. It can be monitored, and I venture that it could become a feature of general election contests, with the parties including in their manifestos their target for tax freedom day over the lifetime of the following Parliament.
I sincerely hope that the Bill receives its Second Reading and is able to proceed into Committee, so that we can take it through its remaining stages when we meet again on 20 January.
Rachel Reeves
I think my hon. Friends are where I would like to be today—in the constituency meeting constituents, rather than here. I usually try to go back to my constituency on a Thursday, as do many other MPs. Of course, the Members who are here today think that this issue is more important than doing work in their constituencies.
Charlie Elphicke
A few moments ago, the hon. Lady mentioned the taxation of cigarettes. Seeing my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg) in the Chamber, it is only right that I remind her that the Roman emperor Marcus Aurelius said in his “Meditations”:
“Into every life a little rain must fall.”
Those of us who smoke have enough rain with the health hazard, without massive taxation on top.
Rachel Reeves
I am afraid I only went to a comprehensive school, so I did not study Latin. Maybe the hon. Member for North East Somerset (Jacob Rees-Mogg) would like to do some interpretation.
The hon. Member for Kettering reminds me of my holidays when I was at school. As he knows, I used to go to Kettering in all my school holidays, because my grandparents lived there. I still have many family members in Kettering.
Rachel Reeves
I expect not.
I was just thinking about the lives that my grandparents led and the things that mattered to them. Every day, they benefited from what happened in both the public and private sector. They worked in the shoe factories in Kettering, as the hon. Member for Kettering knows—we have discussed it before. However, they also lived in a council house, when they were ill they used Kettering general hospital, and their children went to state schools in Kettering. My father went to Kettering grammar school.
Having a tax freedom day suggests that until that date in May, June or whenever it falls, people are contributing to someone or something else, or to the Exchequer. Actually, the money that they pay in taxes every day from the beginning of January until the end of December is used for things that matter to them, for instance building council houses such as my grandparents lived in, paying for teachers and for schools such as they went to and paying for nurses and doctors in the hospital that treated them when they were ill. It seems a little irrelevant to have a tax freedom day, because whether it is 5 February or 25 November, people need both what they pay their taxes for and disposable income to pay for things that matter to them. That is why those suggesting a tax freedom day misconstrue the situation.
Charlie Elphicke
The hon. Lady makes the point that public services need to be funded. Does she not recognise that tax is needed also to fund the interest on the Government’s debt, much of which was added by the previous Government? Does she share my regret that we have so much debt as a nation?
Rachel Reeves
The reality is that because the current Government have failed to get a grip on growth, and because unemployment is rising and inflation is higher than forecast, borrowing is now expected to be £46 billion higher over the course of this Parliament than they had previously planned. When the Office for Budget Responsibility reports next week, we are likely to see that Government borrowing will be higher still.
The point is that we cannot reduce the budget deficit just through tax increases and spending cuts. We also need economic growth, and we can see the difference between the UK’s growth rate of 0.5% over the past year and the higher rates of other countries such as the US, Canada and even Italy. We cannot reduce the deficit and get debt down unless the economy is growing again and creating jobs; otherwise, we will end up paying more out in benefits and getting less in through tax revenues. That is why the Government’s deficit reduction plans are not bearing fruit—they do not have the strategy for growth upon which all that hinges. I believe that if we want to reduce the deficit and get our constituents back to work, we need a plan for jobs and growth. Without that, borrowing will continue to get higher and tax freedom day will be a little bit later in the year.
I was looking earlier at Labour’s five-point plan for jobs and growth and wondering how much of it Conservative Members, particularly the hon. Member for Kettering, might support. The first point is a temporary reduction in VAT, which he might support because it would bring forward tax freedom day to slightly earlier in the year. I suspect that he would not support the second point, which is a £2 billion tax on bank bonuses, although most of our constituents would not be affected by it. The bank bonus tax would be used to fund 100,000 jobs for young people, which would get more people back to work and paying taxes and mean that less was being paid out in unemployment benefits. Perhaps that, too, would bring forward tax freedom day.
The third point is the introduction of long-term investment projects. That might sound like something that the hon. Gentleman would disagree with, but if it helps people to get back to work, particularly in the construction sector, perhaps Conservative Members would support it. It would get more people back to work and paying taxes. The fourth component of Labour’s five-point plan for jobs and growth is a one-year cut in VAT—to 5%—on home improvements. Perhaps Conservative Members could also support that, given that it is a tax cut. The fifth point is a one-year national insurance tax break for every small firm taking on new workers. I hope that they could support that, too, because it would help small businesses to take on more employees and get the economy moving again.
Charlie Elphicke
The hon. Lady mentions a long wish list but what would be the total cost in extra public spending?
Rachel Reeves
The Government will be borrowing more this Parliament because they are paying the costs of economic failure: they are paying the costs of having 2.62 million unemployed people, including 1.02 million unemployed young people; they are paying because growth, at 0.5% over the past year, is lower than the Office for Budget Responsibility forecast; and they are paying for the higher levels of inflation, which was 5.2% in September compared with the 4.3% that the OBR forecast, which means that we are paying out more in benefits.
The Government are borrowing £46 billion more this Parliament, and as I said earlier, that number is likely to rise next week because the Government have not done enough to get the economy moving, to get people back to work and to contain inflation. The VAT increase led directly to that increase. I accept that these policies would cost money but they would get people back into jobs, get the economy growing again and reduce the budget deficit at a more balanced pace. As Conservative Members have said in the past couple of days, it is clear that although targeted tax cuts now might mean a bit more borrowing, they would help to get the economy back on track, which would also help to reduce the budget deficit in a balanced way.
Charlie Elphicke
But would that extra borrowing not put at risk our interest rates? I do not know whether the hon. Lady is aware, but today the interest rates on UK gilts are lower than those on German bunds. I do not know when that last happened. The risk is that if we borrow more, interest rates will be higher, which will have vastly more negative effects on our economy than the current spending squeeze—
Mr Deputy Speaker (Mr Nigel Evans)
Order. I do not want this turned into a general economics debate. I ask the hon. Lady to focus on the Bill.
Charlie Elphicke
May I finish first, Mr Deputy Speaker? That would delay tax freedom day.
Rachel Reeves
It is good to know that the hon. Gentleman will talk about more than just the cost of cigarettes. The last time I looked, yields on German Government bonds and UK gilts were 2.14% and 2.16% respectively. I do not know whether that changed when he nipped out of the Chamber for a cigarette.
Market traders are looking for a deficit reduction plan, but they are also looking for economies that will grow. Economic growth is a component of reducing the debt and tackling the budget deficit. Unless we have growth, we pay out more in benefits and get in less in taxes. If we want tax freedom day to be a bit earlier in the year, we need more people in work and more businesses succeeding, which is why Labour’s five-point plan for jobs and growth is so important to getting people back to work and achieving the balanced deficit reduction that we need.
In conclusion, I do not support the Bill. It is not a good use of Government time, parliamentary time or taxpayers’ money to celebrate a tax freedom day. Our constituents would all prefer us to concentrate on the things that matter to them: jobs, growth and the squeeze on living standards. The Minister said earlier in the week that the Government were on track to meet their deficit reduction plans. It would be interesting to hear what she has to say about that today, ahead of the OBR’s numbers’ coming out next Tuesday. I believe that a policy of targeted tax cuts to help families is more in touch than the Government sticking doggedly to plan A. I thank the hon. Member for Kettering for giving us a chance to debate these issues today, and I am sorry that I am unable to support his Bill.
Eurozone Crisis
Charlie Elphicke Excerpts(12 years, 6 months ago)
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Urgent Questions are proposed each morning by backbench MPs, and up to two may be selected each day by the Speaker. Chosen Urgent Questions are announced 30 minutes before Parliament sits each day.
Each Urgent Question requires a Government Minister to give a response on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Mr Speaker
Order. As the House knows, there is intense interest in this subject, which I am keen to accommodate. However, I must now insist on single short supplementary questions without preamble, and ask for the wonderfully succinct replies from the Minister to continue.
Charlie Elphicke (Dover) (Con)
Does the Financial Secretary agree that, while much progress has been made over the last 18 months—demonstrated most recently by this week’s excellent growth figures—we need measures to protect us from the implosion of the eurozone? What does he think are the best options to shield us from wider economic turbulence in that direction?
Public Service Pensions
Charlie Elphicke Excerpts(12 years, 6 months ago)
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Danny Alexander
The hon. Gentleman can certainly ask that and I certainly will do so. The Government are setting out this new offer, which is conditional on agreement being reached. The Government will continue to work very hard to achieve that agreement, both in the scheme-specific discussions and in the central process, which we will also continue.
Charlie Elphicke (Dover) (Con)
Does the Chief Secretary agree that, as longevity is still increasing by about two years a decade and is likely to carry on doing so, we cannot stick our head in the sand or sit on the fence, as we have seen the Opposition do? All parties need to work together to reach a proper consensus, so that we can achieve a long-lasting, sustainable settlement.
Danny Alexander
I think that it would be in the national interest to have a proper cross-party consensus on today’s proposals. The hon. Gentleman is right to highlight the increases in longevity. By linking the normal pension age to the state pension age we can ensure that the taxpayer is protected from that in future, because as longevity increases, the state pension age can be changed. That is the right way to protect pensions, rather than the previous Government’s cap and share arrangement, which would have meant complex negotiations every three years. That would have resulted in both increases in contributions and reductions in benefits every three years. By setting out this scheme now, we have one that can last for 25 years without the need for further negotiation.
Oral Answers to Questions
Charlie Elphicke Excerpts(12 years, 6 months ago)
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Charlie Elphicke (Dover) (Con)
May I welcome today’s excellent economic growth figures, which are well ahead of forecasts at 0.5%? Our growth is just as high as US growth this year, without the massive fiscal stimulus. Is that not right?
Jobs and Growth
Charlie Elphicke Excerpts(12 years, 7 months ago)
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Ed Balls
The hon. Gentleman will have to convince his constituents because, despite the fact that we were told a year ago that the recovery would be on track, growth has flatlined for a year and unemployment is rising right across the country, which means that borrowing will be higher, not lower.
Charlie Elphicke (Dover) (Con)
The shadow Chancellor responds to questions about his failing to convince his shadow Cabinet colleagues and former Cabinet colleagues by talking about convincing constituents, so why have his poll ratings for economic credibility fallen among his constituents and my constituents and across the whole country?
Ed Balls
I would be happy to have a debate with the hon. Gentleman on economic credibility. He said in June this year:
“Employment has gone up in my constituency and unemployment has been falling, which is welcome.”—[Official Report, 22 June 2011; Vol. 530, c. 426.]
The figures show that unemployment in his constituency has gone up by 456 in the past year. Perhaps he should apologise to his constituents for getting it wrong.
Ed Balls
I will make a little more progress, but I will take interventions from people who have not intervened. Good grief, I have given the hon. Member for Dover (Charlie Elphicke) enough of the wrong type of publicity already and do not want to do his career any more damage.
There is a credible alternative. Why will the Chancellor not act? He used to be so confident that his plan was working. It is patently not working. He and his cheerleaders on the Government Benches claim that however bad things get, he is trapped by the financial markets. He cannot take the advice of the IMF and the OECD and change course because it would lead to higher interest rates and recession. However, the IMF has said that we cannot have credibility without growth.
The markets know that rising unemployment and zero growth are undermining the Chancellor’s deficit reduction plan. One chief economist in the City at Baring Asset Management said last week:
“Growth is essential if the UK is to be able to finance new debt, repay old debt and convince the markets and credit rating agencies there is a modicum of competency in policymaking. The longer we pursue current policies, the more likely it becomes that the UK will be the next target”.
That is the real market view. We know that the credit rating agencies put out their press releases, but the real view, as the IMF has told us, is that having a flatlining economy and rising unemployment is the wrong way to get the deficit down. As I said, even the Chancellor’s friend at the IMF has said that
“growth is necessary for fiscal credibility”.
Britain has no growth. That is why our Chancellor is losing credibility.
Kerry McCarthy (Bristol East) (Lab)
May I say what a pleasure it was to work with the shadow Chancellor and the rest of the shadow Treasury team over the past year? Although I have moved on to pastures new, I am very happy to speak in support of their motion today.
As we have heard, in the past nine months, the UK economy has not grown at all. Forecasts have had to be revised downwards, and the future prospects for growth are bleak, given the scale of Government cuts and the Chancellor’s failure to acknowledge that in fragile economic times a slash-and-burn policy, far from stimulating growth and bringing down the deficit, will cause growth to flatline. It will actually cost us more as a result of decreasing tax receipts, increasing benefit payments, people having less money to spend, and the Government having to borrow £46 billion more than they thought they would.
As the head of the International Monetary Fund, Christine Lagarde, warned that slamming on the brakes too quickly will hurt the recovery and worsen job prospects, yet the Chancellor is failing to heed the warning signs. Economic indicators such as today’s unemployment figures, which are devastating for people in areas such as my constituency, tell the Chancellor that not only is he going too fast, but he is on completely the wrong road. We do need to reduce the deficit, but at a pace that does not harm economic growth. Labour’s plan for growth involves bringing forward long-term investment projects for schools, roads and transport, building 25,000 more affordable homes, and creating 100,000 jobs for young people, funded by a £2-billion tax on bankers’ bonuses. That is what my constituents want a Government to do.
In my constituency, I see the impact of Government policies mounting up in a multitude of individually small but cumulatively large ways. For example, there is the public sector worker who has had a pay freeze, is paying 2.5% more VAT, has had their child care tax credits cut from 80% to 70%, and will soon have to contribute 3% more to their pension. That is not to mention the rise in inflation, how much more it costs to fill a tank with petrol, ever-rising fuel bills, or the extra pounds that the weekly food shopping costs. There are also the local services that people now have to pay for, and that used not to come at a cost.
This week, we have heard a stark warning from the Institute for Fiscal Studies and the Joseph Rowntree Foundation about the impact that the Government’s policies are having on child poverty. I was there, in the previous Parliament, when all the party leaders and MPs from all parties rushed to sign up to the child poverty pledge to commit to abolishing child poverty within a generation. There was a cosy air of cross-party consensus. As one of the MPs who had been working closely with the End Child Poverty coalition, I did not want to say or do anything to derail that, but I was quietly highly sceptical. There were warm words and MPs posing with marker pens as they signed the pledge as part of a photo opportunity, so that they would appear in their local papers.
Kerry McCarthy
No, I do not have time. I was highly sceptical that the pledges would translate into real action if the Conservative party got into Government. Sadly, my scepticism has proved well founded. The IFS warned yesterday that the Government’s tax and benefit changes will push 400,000 children into relative poverty by 2015. The number of children in absolute poverty will rise by 500,000 to 3 million. Instead of us eradicating child poverty by 2020, the Government’s policies mean that 3.3 million children—one in four children in the UK—will be in relative poverty. Labour when in government lifted nearly 1 million children out of poverty; this Government will put another generation of children right back there. It is little wonder that the chief executive of the Child Poverty Action Group described it as a “devastating report”. She said:
“Ministers seem to be in denial that, under current policies, their legacy threatens to be the worst poverty record of any government for a generation.”
Eurozone
Charlie Elphicke Excerpts(12 years, 7 months ago)
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Mr Osborne
We should certainly listen to the sage words of the former Labour Trade Minister.
Charlie Elphicke (Dover) (Con)
Deficit reduction has kept us ahead of the curve, so our triple A rating has been maintained and interest rates are lower than they otherwise would be. Is it the same with quantitative easing, that it will keep us ahead of the curve if the eurozone does not make the right decisions in the next three or four weeks?
Mr Osborne
As I said, it was an independent decision of the Bank of England. In the explanation that the Governor gave of why the Bank took the decision, he explicitly referred to the situation regarding the euro. I agree with that decision. Work done by the Bank of England suggests that the method can work.
Oral Answers to Questions
Charlie Elphicke Excerpts(12 years, 8 months ago)
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Danny Alexander
I am aware of the survey, and of course many businesses are experiencing difficulties, not least owing to the headwinds in the global economy that we—along with other countries—are encountering. That is why we are taking measures to help businesses such as those to which the hon. Lady has referred, through our plan for growth and in relation to regulation, the planning system and investment in the transport infrastructure. I am sure she agrees that constitutional uncertainty about independence in Scotland is causing serious damage to businesses and business investment there.
Charlie Elphicke (Dover) (Con)
Is not the most important contribution that the Government can make to economic growth to be “united at the top” and to have “a credible economic policy”?
Danny Alexander
I agree very much with that. I believe that it is a quotation from the former Chancellor of the Exchequer, the right hon. Member for Edinburgh South West (Mr Darling). We are united at the top and we have a credible economic policy, while the Opposition—if I may use the former Chancellor’s phrase—are “not at the races”.
Finance (No. 3) Bill
Charlie Elphicke Excerpts(12 years, 10 months ago)
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Charlie Elphicke (Dover) (Con)
May I congratulate the Opposition on submitting the amendment on time and on its being selected? In relation to this report, I ask the right hon. Gentleman whether it is fair, right and proper that in 1978 the top 1% of earners paid 11% of all tax and that they now pay 25%.
Mr Hanson
I am grateful to the hon. Gentleman. I presume that he does not support the 50p tax rate, whether it raises revenue for the Treasury or not. We do not want HMRC to do a private report for Ministers, and for Ministers then to make political judgments about the 50p additional rate. Through the OBR’s involvement, we want there to be a public report on the impact of the rate which is open to scrutiny.
The hon. Member for Dover (Charlie Elphicke) will know that about 308,000 people are affected by the 50p rate. I am not surprised that he supports its abolition and a lower rate, because he knows that it is paid less in my region in Wales, in the north-west region of my right hon. Friend the Member for Birkenhead and my hon. Friend the Member for Denton and Reddish (Andrew Gwynne) and in the north-east region of my other hon. Friends. The benefit of this tax cut, if it happens, will predominantly affect south-east and east England and the wealthier parts of London, although it will not particularly affect the constituency of my hon. Friend the Member for Vauxhall (Kate Hoey). I understand why the hon. Member for Dover wants to get rid of the rate. If he does, there will be a tax benefit for the richest people in our society and for certain parts of the United Kingdom.
All I am saying to the Minister is that we want to see the evidence on whether the additional rate raises money. If it does not raise money, we want to see it openly scrutinised. If it does raise money, we want to expose that, so that if the Minister and his hon. Friends cut the rate, it will be clear that they are doing so for political reasons and not because it is ineffective.
Charlie Elphicke
The right hon. Gentleman should know that in Dover there is a lot of deprivation. My case is not that we should get rid of the 50p tax rate tomorrow, but that we should do so at the right time. My question was simply whether it is safe and sensible for so much of the tax base to depend on so few people in this country?
Mr Hanson
I just say to the hon. Gentleman that in south-east England, which I recollect covers Dover, some 67,000 people pay the additional rate, whereas in north-east England, which is represented by some of my hon. Friends who are present, only 5,000 people pay it. Clearly, there will be a regional imbalance if this tax cut goes ahead. We will consider those issues in due course. I know that there are areas of great poverty and deprivation in Dover, where people do not pay the additional rate, but the hon. Gentleman has imposed value added tax on those people through votes in the House of Commons, and that is an unfair tax.
The simple point I make to the Minister is that we want open scrutiny of the decisions he takes on the ending or otherwise of the 50p additional rate. The leader of the Labour party has said that we would maintain that rate for the duration of this Parliament. The Minister and his colleagues have indicated that they want to do away with it. They are now trying to produce the information to show why that should be done. I believe that the Office for Budget Responsibility would provide greater scrutiny of that decision than—dare I say it?—the Minister in an in-house decision. We will test the matter tonight, and I hope that the Exchequer Secretary will accept the amendment. It relates to a core role and duty of the OBR, which is on its website, and I cannot see why he would not wish it to review the Government’s decision formally.
Mr Hanson
That is true. My hon. Friend will know that “We’re all in this together” is one of the Government’s refrains, and a review would show whether that is true. I want to know that preferably from the OBR, as suggested in the amendment, but otherwise from the Exchequer Secretary. The Government need to set out why they have decided to reduce the 50p rate in 2013, if that is their decision; what it will cost; what the forgone income will be; and who will benefit. There should not just be internal discussions—the decision should be open to public scrutiny through the OBR.
I am grateful to my right hon. Friend the Member for Birkenhead for tabling amendment 30, which highlights an extremely important issue. Again, I wish to hear the Exchequer Secretary’s response today. I do not wish to steal my right hon. Friend’s thunder, but he will know that the Conservatives pledged in their manifesto to freeze public sector pay, but to exclude from that 1 million of the lowest-paid workers. It stated that they would
“freeze public sector pay for one year in 2011, excluding the one million lowest paid workers.”
Through great effort, he has used parliamentary questions to uncover the fact that that is not the case, and that the Conservative Government have yet again broken a promise in their election manifesto. I believe that he will make a strong case that we need some explanation from the Government of what they are doing about the impact on low pay of the public sector pay freeze that has been put in place.
My right hon. Friend will know that there are issues to consider about the applicability of his amendment to clause 1 and its workability, and indeed its fairness. However, he has highlighted an extremely important issue, and I want the Exchequer Secretary to explain why the Conservatives’ words about ensuring that low-paid workers were not disadvantaged have proved to be weasel words.
Charlie Elphicke
Is the right hon. Gentleman’s position and that of the official Opposition that they support amendment 30?
Mr Hanson
I have not yet heard what my right hon. Friend the Member for Birkenhead has to say about it, but the hon. Gentleman might be interested to know that we have discussions not just in the Chamber but outside it as party colleagues. My right hon. Friend will make his case in a moment, and I will listen to it and respond in due course. There are some issues that we need to consider, but it is not for me to respond to amendment 30; it is for the Exchequer Secretary to say why he has let down low-paid workers across the United Kingdom through his promises before the elections and his actions in the Budget. I look forward to hearing my right hon. Friend in short order.
My hon. Friend the Member for Hayes and Harlington has yet again tabled an amendment that has a great deal of merit. Although I do not expect it to be pushed to a vote, I want to hear what he says about it, because he has important points to make. The key point on all the amendments is that the Government need to provide clarity. We need clarity about what they are doing on the 50p tax rate and on low-paid workers, and on the points raised by my hon. Friend’s amendment. I look forward to hearing my hon. Friend, my right hon. Friend the Member for Birkenhead and the Exchequer Secretary in due course.