Amendment of the Law

Edward Leigh Excerpts

Thursday 20th March 2014 Commons Chamber

[Ed Balls]

I do not agree, but I will come on to that in a moment.

We will study very carefully the proposals put on the table for discussion. We have just had a statement. The proposals are important, and it is important to have more flexibility and choice. We have been calling for reforms of the annuities market: to be honest, the price of annuities and competition in the market have not been good enough over the past few years. I must say that we all remember the pensions mis-selling of the early 1990s, and we need to make sure that there is a tight grip on tax avoidance. That is why we will look carefully at the proposals.

I must tell the hon. Gentleman that if he looks at table 3.6 on page 87 of the Office for Budget Responsibility’s report on this so-called Budget for savers, he will see that the savings ratio was 7.2% in 2012 and 5% last year and—here is what will happen to savings in the next five years—then goes from 4.1% to 3.6% and down to 3.2%. The Budget for savers will see savings fall every year in the next five years, with each of the figures revised down by the OBR in its latest forecasts. I must say that I am not sure whether this is quite the Budget for saving that it is stacked up to be.

What we desperately needed was a Budget that delivered for the many, not just a few at the top. What a wasted opportunity it was. The annual increase in the personal allowance is outweighed completely by the 24 tax rises that we have seen since 2010. The Chancellor’s welcome conversion to the importance of capital allowances for business investment means that he has reversed the cuts to capital allowances that he made in 2010. Let me tell him what the OBR says in the Budget documents about the overall impact of all the Budget measures:

“The measures in the Budget are, in aggregate, not expected to alter the OBR GDP growth forecast.”

This Budget will have no impact on growth at all.

As for the Chancellor’s 1p cut in beer duty, welcome as it is, it means that people have to drink 300 pints to get one free. This morning’s Tory poster says:

“Bingo! Cutting the bingo tax & beer duty to help hardworking people do more of the things they enjoy”.

How patronising, embarrassing and out of touch that is. The Tory party calls working people “them”—them and us. Do the Tories really think that they live in a different world from everyone else? Does that not reveal just how out of touch this Tory Government are? It is no wonder that they do not understand the cost of living crisis and no wonder that the Chancellor did nothing in the Budget to tackle it.

We are told by the Chancellor that he did not know that the poster was coming out. The Tories’ chief election strategist did not know about the ad campaign that came out straight after his Budget—pull the other one! It gets worse. I hear that the Prime Minister did not properly understand what the Chancellor was saying. Apparently, when he told the Prime Minister that he wanted to cut taxes for Bingo, the Prime Minister thought he was referring to an old school chum: “Hurrah, another tax break for millionaires. Bingo, Bingo!”

It is okay though, because we know that the job of the chair of the Conservative party is safe. No. 10 says that the Prime Minister has full confidence in the Tory party chair. That’s the end of him then! According to The Sun, the Tory party chair is currently on a tour of northern cities, presumably to see how the other half live. I wonder how it is going. Can you imagine, Mr Deputy Speaker? “Goodness me, the houses even have indoor toilets these days.” I wonder whether he is looking for pigeon fanciers up north. My advice to him is to change his name back to Michael Green. That was a bit safer.

The problem with the Budget was not what it did, but what it did not do. Where was the freeze on energy prices that Labour has called for? Where was the 10p starting rate to cut the taxes of 24 million working people? Where was the expansion of free child care to 25 hours a week for working parents? Where was the compulsory jobs guarantee, paid for by a tax on bank bonuses? Where was the cut in business rates for small firms? Where was the new investment in affordable housing? Where was the reversal of the £3 billion top rate tax cut to balance the books in a fair way? We got none of Labour’s cost of living plan to balance the deficit in a fairer way, just more of the same. Working people are worse off, while millionaires get a tax cut—just more of the same from the same old Tories.

[Sir Edward Leigh (Gainsborough) (Con)]

If I may gently return to the Budget, I understand that the Labour party accepts the welfare cap—that is fair enough—but that it wants to restore the spare room subsidy, which would cost £465 million. Will the shadow Chancellor explain to the House what other bit of welfare he would cut?

[Ed Balls]

I will. We have said very clearly that we would take the winter fuel allowance away from the richest 5% of pensioners, which would be a saving. We would also invest in affordable housing to get the housing benefit bill down. I do not know whether the Chancellor gets to read the OBR report. I think that he should listen to what it says:

“The rising proportion of the renting population claiming housing benefit may be related to the weakness of average wage growth relative to rent inflation. This explanation is supported by DWP data, which suggest that almost all the recent rise in the private-rented sector housing benefit caseload has been accounted for by people in employment.”

People in employment are seeing their wages fall and are having to claim housing benefit. It is no wonder the welfare bill has gone up by £13 billion since 2010.

It was not supposed to be this way. We all remember what the Chancellor promised in 2010: he would make people better off, balance the books by 2015 and rebalance the economy for the future. We know that people are worse off. We also know, after three years of flatlining growth, that his commitment to balance the books in 2015 is in tatters. He does not expect a balanced budget in 2015, but a deficit of more than £75 billion. It is all in the OBR report. There will be £190 billion more in borrowing than he planned in 2010. The national debt is rising this year, next year and the year after.

--- Later in debate ---

[Vince Cable]

It does, but the figures produced over the last year suggest that long-term unemployment is falling, along with unemployment in general.

[Sir Edward Leigh]

My right hon. Friend is making an excellent speech in favour of hard work. I read in the papers yesterday—so it cannot possibly be true—that the Chief Secretary had boasted that he had personally vetoed any indexing of relief for higher-rate taxpayers. Surely my right hon. Friend, who is pro-enterprise, cannot think it right that a police sergeant is paying higher-rate tax.

--- Later in debate ---

[Sir Edward Leigh (Gainsborough) (Con)]

I may not agree with all that the hon. Member for West Bromwich West (Mr Bailey) says, but he always speaks with calm courtesy and forensic good sense, so we are grateful for his comments. I am also grateful that my hon. Friend the Financial Secretary is sitting on the Front Bench. I hope that what I am going to say is not entirely off message from what the Government believe. Because I respect and admire him so much, I have a sneaking suspicion that privately he might agree with much of what I will say.

The fact is that, for all the huff and puff, when it comes to what it actually puts into and takes out of the economy, the Budget represents a 0.3% change—£2 billion out of £732 billion of spending. That is somewhat worrying when we consider the very big challenge we face on deficit reduction and, following what the hon. Member for West Bromwich West said, what could be a debt-fuelled boom, which is the traditional British way of climbing out of recession.

I wanted to try to start on a positive note, however, so I should quickly say that I think this Budget will be remembered for its entirely freedom-loving, Thatcherite, people-trusting measures on annuities. However, those points have been made repeatedly, so I do not need to labour them.

I want to talk about what is happening to higher rate taxpayers. The top 5% pay 45% of all income tax. The top 1%—just 30,000 people—pay 30% of all income tax, which is more than the lowest 50%. Let me say gently to the Business Secretary—he is not here, but I am sure he will read Hansard avidly—that I think he was being slightly disingenuous when he replied to my intervention in which I bemoaned the fact that we are not indexing the higher rate tax. He said, “Well, we’ve made a start”, but it is a very small start. Under this Budget, 400,000 more people will still be dragged into paying higher rate tax. Some 1.4 million middle-earners—small business men; managers; hard-working nurses, matrons and teachers at the top of their professions; police sergeants—have all been dragged into this higher rate of tax during this Parliament, on our watch.

The higher rate of taxation is almost turning into the standard rate. The top half of taxpayers contribute 90% of all tax intake. When Nigel Lawson introduced the 40p rate in 1988, it was paid by just 1.35 million people. Now, 4.5 million people pay the higher rate of tax, and by 2015 that figure will have risen to nearly 5 million. I personally do not believe that this is what the higher rate of tax was designed for. It should attack people on higher rates of earnings, and that means those who earn a reasonable amount of money; it should not attack police sergeants, senior matrons or classroom teachers. That is wrong and inequitable.

We need from the Government a sense of mission and direction, and the sense of mission and direction that I want to see is one that is aimed at simplifying all taxation. After every Budget speech—rather like the Secretary of State, I think I have now sat through 18—I make the point again and again that simplification pays off. When we reduce taxation on the top earners, as we saw when we reduced the top rate of tax from 50% to 45%, we encourage enterprise, remove avoidance and even evasion, and generate more income and growth. This is a Conservative philosophy of enterprise and rewarding hard work, and that is what a Conservative Government must be about. I earnestly enjoin the Government to try to right this inequity against higher rate taxpayers in their next Budget, or, if not, in the manifesto.