Christopher Chope
Main Page: Christopher Chope (Conservative - Christchurch)Department Debates - View all Christopher Chope's debates with the HM Treasury
(12 years ago)
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Mr Christopher Chope (Christchurch) (Con)
I beg to move amendment 9, page 4, line 33, leave out ‘high’ and insert ‘higher’.
The Temporary Chair (Hywel Williams)
With this it will be convenient to discuss the following:
Amendment 10, page 4, line 34, at end add
‘for recipients of child benefit’.
Amendment 75, page 4, line 35, at end add—
‘(2) Schedule 1 will not come into effect until a study has been carried out into ways of mitigating the impact of the Schedule on families with only one earner, compared with families with two earners, and placed in the Library of the House of Commons.’.
Clause stand part.
Amendment 11, in schedule 1, page 131, line 7, leave out ‘high’ and insert ‘higher’.
Amendment 12, page 131, line 8, leave out ‘high’ and insert ‘higher’.
Amendment 25, page 131, line 10, leave out ‘£50,000’ and insert ‘£60,000’.
Amendment 26, page 131, line 11, leave out
‘one or both of conditions A and B are’
and insert ‘condition A is’.
Amendment 13, page 131, line 12, leave out ‘high’ and insert ‘higher’.
Amendment 27, page 131, leave out lines 19 to 24.
Amendment 28, page 131, line 24, at end insert—
‘(5) A person (P) is not liable to a high income child benefit charge if the total adjusted net income for the year of that person and any partner does not exceed £100,000’.
Amendment 77, page 131, line 24, at end insert—
‘(5) A person (P) is not liable to a high income child benefit charge if the total adjusted net income for the year of that person and any partner does not exceed £100,000, subject to any child or children in respect of whom child benefit is claimed being resident in the United Kingdom notwithstanding the European Communities Act 1972.’.
Amendment 14, page 131, line 26, leave out ‘high’ and insert ‘higher’.
Amendment 29, page 131, line 29. leave out from ‘met’ to end of line 30.
Amendment 30, page 131, line 31, leave out ‘and B’.
Amendment 31, page 131, line 32, leave out from ‘is’ to end of line 13 on page 132 and insert ‘100%’.
Amendment 32, page 132, line 14, leave out from beginning to end of line 2 on page 133.
Amendment 33, page 133, leave out lines 16 to 26.
Amendment 34, page 133, line 29, leave out ‘another’ and insert ‘a higher’.
Amendment 35, page 133, line 30, leave out from ‘681B(1)(a)’ to end of line 33.
Amendment 36, page 133, leave out lines 36 to 39.
Amendment 37, page 134, leave out lines 3 and 4.
Amendment 38, page 134, leave out lines 10 to 12.
Amendment 15, page 134, line 28, leave out ‘high’ and insert ‘higher’.
Amendment 39, page 134, leave out lines 34 to 37.
Amendment 16, page 135, line 9, leave out ‘high’ and insert ‘higher’.
Amendment 40, page 135, leave out lines 13 to 23.
Amendment 41, page 135, leave out lines 37 to 40.
Amendment 17, page 135, line 38, leave out ‘high’ and insert ‘higher’.
Amendment 18, page 136, line 9, leave out ‘high’ and insert ‘higher’.
Amendment 42, page 136, leave out lines 13 to 23.
Amendment 19, page 136, line 35, leave out ‘high’ and insert ‘higher’.
Amendment 20, page 136, line 38, leave out ‘high’ and insert ‘higher’.
Amendment 21, page 136, line 45, leave out ‘high’ and insert ‘higher’.
Amendment 22, page 137, line 13, leave out ‘high’ and insert ‘higher’.
Amendment 23, page 137, line 22, leave out ‘high’ and insert ‘higher’.
Amendment 24, page 137, line 26, leave out ‘high’ and insert ‘higher’.
Schedule 1 stand part.
Mr Chope
I rise to speak to amendment 9 and the other amendments in the group, standing in my name and that of my hon. Friend the Member for Gainsborough (Mr Leigh). We face a rather unsatisfactory state of affairs, because the guillotine will fall at 6 o’clock, which means that we have precisely 52 minutes to discuss the whole of clause 8 and schedule 1, which deal with child benefit and will affect 1.2 million families up and down the country, potentially yielding £1.5 billion for the Exchequer. How can one do justice to the complexity of what the Government are proposing in this short space of time?
Mr Chope
I see the hon. Lady on the Opposition Front Bench agrees with me about that.
Perhaps it is appropriate to start by reminding the Committee of what our right hon. Friend the Prime Minister said on 26 May 2009. He said that he had accepted, as Conservative party policy, that
“The House of Commons should have more control over its own timetable, so there’s time for proper scrutiny and debate.”
He said that
“there should be much less whipping during the committee stages of a Bill,”
because
“that’s when you really need proper, impartial, effective scrutiny—not partisan point-scoring and posturing.”
It is against that background that I enter into this debate with confidence.
The Government’s proposals will, by their own admission, result in more complexity and less simplicity, which is completely at odds with their avowed intent on tax policy. The administrative costs alone will exceed £100 million, and 650 extra staff will have to be taken on to administer what is effectively the removal of child benefit from 1.2 million families.
Kelvin Hopkins
I agree with the hon. Gentleman entirely. I recall when child benefit was first introduced in the 1970s, and I have to point out to those on the Government Front Bench that, throughout the Thatcher and Major Governments, no attempt was made to get rid of that universal benefit. We should stick with universality in this case.
Mr Chope
The hon. Gentleman is absolutely right. Even during the International Monetary Fund crisis in the mid-1970s, things never got so tough that the Government of the day felt the need to interfere with child benefit. It was a reflection of the fact that families with children had higher costs than those without.
The proposals will create all sorts of perverse incentives, and the people who want to try to avoid the measures will have a field day. This has been well covered by the Treasury Select Committee’s recent report, as well as by the Chartered Institute of Taxation and other expert bodies. The fundamental issue is the proposals’ lack of fairness, as between one family and another.
Mr Stewart Jackson (Peterborough) (Con)
The Centre for Social Justice says that the Government’s policy
“could threaten a new wave of family instability and breakdown”,
and that it
“flies in the face of their commitment to ‘shared parenting’.”
Does my hon. Friend find it incongruous that that policy is being pursued at the same time as the Government are failing to honour their commitment to introduce marriage or family tax breaks in this or future Budgets?
Mr Chope
My hon. Friend makes a really good point, which was also covered in the recent Adjournment debate on this subject, which received what I can describe only as a rather woolly response from the Exchequer Secretary to the Treasury, my hon. Friend the Member for South West Hertfordshire (Mr Gauke). He said that, basically, something was going to happen in this Parliament but the Government were not quite sure what or when. That was not good enough. We need an opportunity to look at the whole issue of transferrable tax allowances, and allowances in the tax and benefit system that recognise the family and marriage.
Returning to the issue of fairness, two people on £50,000 a year with children will not have to pay the high income child benefit charge, whereas a family with children with one person earning over £60,000 will have to pay it.
Steve Brine (Winchester) (Con)
On the issue of fairness, would my hon. Friend have any truck with the idea of limiting child benefit to, say, the first two or three children, regardless of the parents’ income, which would retain the universal element?
Mr Chope
There is a whole host of ideas going round. There was a time when no child benefit or allowance was payable for the first child, on the basis that parents should take responsibility for that child and bear the costs themselves, but, if they had any more, they could expect the state to help them. My hon. Friend’s point illustrates further the fact that this measure should have been the subject of proper consultation and draft clauses, so that we could have had a debate on it in the wider context of universal benefits. Instead, it was announced at the party conference and implemented in this way.
Andrew Gwynne (Denton and Reddish) (Lab)
Is not one of the benefits of a universal system of child benefit the fact that everyone in society who has children feels part of that society and that welfare state? The proposal will breed resentment not only between the haves and the have-nots but between the haves and those whose family situation fits the new system.
Mr Chope
The hon. Gentleman makes a good point against these provisions. On the issue he raises, it would be worth reminding ourselves that the Christian organisation CARE has produced a useful document, “The Taxation of Families 2010/11”, which considers whether current tax burdens are fair. It looks at the relative position of households up and down the income distribution scale in the United Kingdom. For a family on £51,543 a year, who represent 150% of the reference wage, a single person with no children is better off than 94% of the population, a one-earner couple with no children are better off than 81% and a lone parent with two children are better off than 80%. Yet a one-earner couple with two children are better off than only 63% of the population and a two-earner couple with two children are better off only than 69%. That shows that targeting families with children for this tax exacerbates the unfairness rather than ameliorating it—running directly against the principles of fairness, equity and justice.
Kate Green
I congratulate the hon. Gentleman on his amendment and on his arguments in support of it. Does he agree that because of the failure to consult, we do not know the answer to the question of how this policy will play out between women and men? Currently, child benefit is paid to the mother as the maintainer of children, but she may now come under pressure from her partner to forgo that child benefit so that his tax bill is not affected. That means an injustice between women and men; and, more importantly, it affects the amount of money spent on children.
Mr Chope
The hon. Lady is absolutely right: that is another of the behavioural consequences, the full implications of which are not yet apparent.
One has to ask why we are going down this road. The justification for it—the avowed policy objective—is this:
“In order to address the fiscal deficit, the Government believes that it is right to ask those on higher incomes to contribute more.”
The Government’s proposal, however, asks those on higher incomes with families and children to contribute more, while those on higher incomes without children are not asked to contribute more. I do not see how that can be fair.
In case anyone thinks this is an issue discussed only among academics, let me say that it certainly goes very close to the heart of many of my constituents. I shall quote briefly from a letter that I received since the Budget from a constituent living in Christchurch. He starts off:
“I am writing to express my utter disgust and outrage at your party’s stance on child allowance announced in the budget last week.”
He explains that he and his wife choose to work hard, believing that they have a responsibility
“to look after ourselves and to help to generate wealth for the wider community”
by contributing their utmost to industry. He says that he has an income of £60,000 and that his wife earns £12,000, providing a combined income of £72,000. As he puts it:
“under your disgusting new Tax rules we will lose the child benefit for our two children. However, in a household with two working parents earning £40,000 each, combined income of significantly more…that family gets to keep their benefit.”
Mr Chope
Before I give way to my hon. Friend, let me read the last paragraph:
“I ask for your commitment to continue your fight against this latest most disgusting taxation scheme on child allowance and rally your fellow back benchers against the current disgraceful and unethical budget.”
Steve McCabe (Birmingham, Selly Oak) (Lab)
If the hon. Gentleman is not successful with his amendment, will he take his constituent’s advice and ask his colleagues to vote against the proposal in its entirety?
Mr Chope
If I am given the opportunity, and if I do not succeed in persuading the Government of the merits of amendment 28 in particular, I shall feel obliged to vote against both the clause and the schedule. I think that by then we shall have done everything possible to try to persuade the Government to change their mind., and if they do not want to change their mind, I shall feel duty bound to express my view in the Lobby accordingly.
The Treasury figures show that there are 840,000 households with children in which at least one person earns over £60,000 a year. I have proposed that everyone earning over £60,000 a year should pay a standard tax increment of about £1,000, which would generate about £2 billion. The 840,000 people in households with children would be only £300 better off, or a bit more, depending on how many children they had. There are approximately another 1.1 million people with taxable incomes of over £60,000 who do not have children. If everyone earning over £60,000 paid an extra £1,000, we would not have to bother with this very partial project of penalising families with children.
I am not suggesting that as a definite solution. I should much prefer, for example, to reduce our contribution to the European Union. [Hon. Members: “Hear, hear.”] However, it would at least be fairer and more consistent with the Government’s avowed intent that those on higher incomes should contribute more to deficit reduction.
Amendment 9 proposes that the
“High-income child benefit charge”
in clause 8 should be described as a higher-income charge. I do not think it accurate to describe someone earning over £50,000 a year as having a high income—although such people may have a higher relative income, as is apparent from the CARE figures that I gave earlier. Funnily enough, HMRC’s own Budget document refers to
“Child Benefit: Income Tax Charge for Those on Higher Incomes”.
I hope that my hon. Friend the Minister will accept that the charge in clause 8 should also be described as a “higher” rather than a “high” income charge. Under the heading “Policy objective”, the document states:
“In order to address the fiscal deficit the Government believes that it is right to ask those on higher incomes to contribute more.”
Obviously mine is a small amendment in comparison with the more substantial ones. If the Government are unwilling even to concede that point, it shows that the degree of stubbornness in the Treasury is even greater than many of us thought.
Is the high-income child benefit charge classified as a tax? I tabled a question to that effect that was due to be answered on Monday, and have just received a written answer from my hon. Friend the Minister—it should have been given then, but I understand the reason for the delay—which states:
“Classification is a matter for the independent Office for National Statistics.”
Effectively, we are talking about a new tax on people with particular incomes, rather than about removing child benefit from them. I have every belief that, in due course, the Office for National Statistics will classify this as a tax.
The Government have been keen to emphasise the need to cut expenditure, and not so keen to introduce tax increases. That may be why they have been rather coy about admitting that this will probably be a tax increase for definition purposes rather than a cut in benefit. My amendment 28, on which I hope we shall have an opportunity to vote, would ensure that there was no unfairness in the treatment of families with identical incomes. The single-parent trap and the couple penalty would be avoided, and the objective that taxes must be fair and simple would be met. This tax is neither fair nor simple.
We were discussing the granny tax earlier, and I would describe the measure now under discussion as a tax targeted at mummies and daddies in the squeezed, hard-working middle. People on equivalent incomes without parental responsibilities have nothing extra to pay and some households on joint incomes with children will also pay nothing, whereas single parents earning over £60,000 will pay a minimum of £1,300 a year more than before, and some of them will pay a lot more than that. This cannot be right. I hope the Minister will say the Government have had second thoughts and are minded to withdraw their proposal.
Cathy Jamieson
I will be as brief as possible, as I am aware that there is not much time left.
There are two key issues: the principle of what child benefit is supposed to be for, and the practical implications of the Government’s proposals. I want to emphasise the word “child” because we have lost sight of the fact that we are talking about children. The Child Benefit Bill introduced in May 1975 by the then Labour Government, with all-party support, was intended to offer a universal, non-means-tested, cash-free tax benefit for the good of all children. At its simplest, it was designed to ensure that mothers had money paid regularly into their purses, giving them at least some form of stable income, and that the money would be used for their families.
Mr Gauke
I have only one minute remaining and want to address the concerns raised during the debate, so I will not give way.
The question was raised of classification and whether or not this was a tax. As my hon. Friend the Member for Christchurch said, that will depend on the Office for National Statistics assessment. Let me deal with the question the hon. Member for Kilmarnock and Loudoun asked. Independent taxation will still apply, each partner will still have their own personal allowance and tax rate bands, and the amount of child benefit, even if it is received by the taxpayer’s partner, will not increase the amount of income liable to tax. Where there are two high earners in a household and they do not want to tell each other their incomes, there will be a mechanism whereby they can find out whether they have a higher or lower income but without the full details.
Mr Hoyle, my time is up. As I have said, the Government have had to make difficult decisions. In order to continue to provide child benefit, we must do so in a sustainable manner. At the current cost that is not the case. We have increased the threshold to £50,000 and put in a taper. This all mitigates some of the concerns that hon. Members have raised, but the budget deficit left by the previous Administration is the challenge we must overcome if we are to avoid a far worse predicament.
Mr Chope
I thank everybody who has participated in this spirited debate. Having heard the Minister’s explanation in relation to amendment 9, I will seek to withdraw it. Hopefully, we can have a vote on amendment 28, which deals with the injustice whereby a single-earner family earning £60,000 will lose their child benefit while a family with two people earning £50,000 will retain it. This issue will come back to haunt the Government, I fear. That sometimes happens when policies are drawn up on the back of a fag packet. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.