Finance (No. 4) Bill

Graeme Morrice Excerpts

Thursday 19th April 2012 Commons Chamber

[Ben Gummer]

I profoundly respect the hon. Gentleman. He is a torchbearer for a former age in the Labour party, and he should raise that point with his own Front-Bench team. We are clearly not going to agree on it. However, at some point, someone needs to face up to the fact that we will almost double spending on old-age pensions between now and 2040. I shall put that in context: the number of people retiring this year who will be alive in 2041 will be more significant than now. I cannot give the precise figure, but hundreds of thousands of people retiring in the next few years will be alive in 20 or 30 years. We are not only dealing with an intergenerational problem, with a problem between this generation and a generation in two or three generations’ time or with a problem between people in their 20s and those in their 60s or 70s; we are dealing with a problem of those retiring now and to whom we must promise pensions and a decent standard of living in 30 years’ time. The ability to afford that is at the crux of the Government’s reforms, and this proposal is just the start of it.

[Graeme Morrice (Livingston) (Lab)]

My hon. Friend the Member for North Ayrshire and Arran (Katy Clark) asked why, if this was such a wonderful proposal, it was not in the Conservative party’s manifesto. My question is this: if this is such a wonderful proposal, why was it the only one not leaked before the Chancellor’s statement?

[Ben Gummer]

The hon. Gentleman knows that that is not the case. [Interruption.] Well, it isn’t. I was endeavouring to have a wider debate about the importance of the reform in the context of the massive pensions challenge and of trying to pay for the pensions of vulnerable people not just this year but in 10 and 15 years.

--- Later in debate ---

[Margot James]

I am sorry, but I will not take any more interventions.

As a result of that Government pledge, there will be no cash losers from this allowance freeze. We have protected universal benefits, with the single exception of not renewing the temporary increase of £100 in the winter fuel payments. We have protected all the other universal benefits, however, as we promised to do. Some 600,000 of the poorest pensioners have received a warm home discount of £120 extra to help with their fuel bills. We have also frozen council tax for two years running. Council tax has been a bone of contention among older people, many of whom have been hit hard by increases in it over the past decade. We have also protected, and increased slightly, the budget for the NHS. As we all know, older people account for more of that expenditure than any other group and they will benefit disproportionately from the NHS budget increase.

I have already made the point that freezing this allowance will entail a cost of, on average, £84 a year. I accept that that is not a derisory amount for someone living on an income of just over £10,000 a year. However, 5 million pensioners will not be affected by this measure. In fact, the Joseph Rowntree Foundation, an organisation that Labour Members sometimes cite, has said that the media coverage has lost all perspective on this matter, stating that

“you would think it’s doomsday for older people…I’m not sure. I think we’re losing perspective on phasing out the Age-Related Allowances”.

It makes a number of good arguments as to why it takes that view.

In conclusion, I must say that I have received very few critical letters on this subject from pensioners. The vast majority of older people in my constituency are more concerned with the prospects for their grandchildren; the average age of a new home buyer is now 38. They might not have read “The Pinch” by my right hon. Friend the Minister for Universities and Science, which was published two years ago, but he pointed out, among many other things, that those in the generation born after 1970 are the first not to be able to look forward to a better standard of living than their parents. That point is felt keenly by many older people in my constituency. Although they cannot easily increase their income, they accept that their grandchildren are facing a different future from the one they faced. Unlike the Labour party, they know that the alternative to facing down this deficit, with everyone making a contribution to that strategy, is the further impoverishment of their grandchildren, and that is not a price that they are willing to pay.

[Graeme Morrice]

I am conscious of the time, Mr Bone, so I will keep my speech short. May I start by congratulating my hon. Friend the Member for Leeds West (Rachel Reeves) on her excellent introductory speech? What she said clearly reflects the views of Labour Members.

The Chancellor’s granny tax is certainly the aspect of the Budget that has caused the most anger among my constituents. As we now know, the Chancellor’s plans, which were buried in the Budget smallprint and described as a “tax simplification”, will mean that 4.4 million pensioners who pay income tax will lose an average of £83 per year next April, with people who turn 65 next year set to lose the most, at up to £322. This measure will affect pensioners on modest incomes of between £10,500 and nearly £30,000, with pensioners on incomes above the higher threshold being unaffected by the change. The pensioners in my constituency I have spoken to about the granny tax are really angry about the Chancellor’s decision to hit them in this way. It seems obvious to them that it cannot be right that while putting up taxes for pensioners, the Government are giving the rich a tax cut. My constituents simply cannot understand why, after they have worked hard all their lives, the Chancellor is now targeting those on low and middle incomes in retirement in order to fund a tax cut for millionaires. As one constituent put it to me recently,

“I sincerely hope you and your colleagues do not support this granny tax and you fight for all our pensioners who worked all our lives to help this country. I am 71 years old and thought I had seen it all, but this is the pits, so do your job and kick this out.”

[Harriett Baldwin]

Has the hon. Gentleman shown his constituents the article in the Financial Times headed: “When is a tax not a tax? Answer: when it’s ‘the granny tax’?

The article says:

“let’s calmly consider what has actually happened…In fact, grannies have retained their cherished position within the UK tax system: they will continue to be allowed more tax-free income than other members of the population—and for at least another three years”.

Has he shared that article with his constituents?

[Graeme Morrice]

I must confess that I have not shared that article from the Financial Times with my constituents, who, like me, are more avid readers of the West Lothian Courier. As we know, the increase in inflation, high fuel, energy and food prices and the VAT increase up to 20% have eroded any increases given to pensioners by the Government.

I am delighted to be able to tell the constituent whom I have just quoted and all the others who have contacted me about this issue that we on the Labour side of the Committee are trying our best to do exactly that today. In other words, we will do our job and kick this proposal out.

[Alun Cairns]

I am grateful to the hon. Gentleman for his generosity in giving way. There is an inconsistency between his actions and his standpoint at the last Budget brought in by the previous Chancellor, who froze the age allowance and the personal allowance. The hon. Gentleman is talking about the effect on pensioners on modest incomes, but at least on this occasion there was a significant increase in the personal allowance. When the previous Chancellor froze the age allowance, he also froze the personal allowance, so that tax affected people on lower incomes. Does the hon. Gentleman not accept that logically that position is inconsistent?

[Graeme Morrice]

I am grateful to the hon. Gentleman for his contribution, but I thought we were talking about the proposals in this Bill.

Although we are clear that the granny tax is not right and not fair, the coalition parties have been desperate to try to play down the significant impact of the measure. As we are aware, this is a £3 billion tax raid on our nation’s pensioners. Indeed, the right hon. Member for Bermondsey and Old Southwark (Simon Hughes) actually went as far as to insist that there is no granny tax at all. That will no doubt come as a great surprise to the 4.4 million pensioners who will be worse off as a result of the proposal, but it is typical of the increasingly desperate attempts by Liberal Democrats to distance themselves in the media from unpopular Government policies, before voting with the Tories to get those same measures through Parliament.

[Ian Swales]

Will the hon. Gentleman give way?

[Graeme Morrice]

I notice that there are two Lib Dems in the Chamber today, so I will give way to one of them.

[Ian Swales]

The hon. Gentleman has obviously discussed the fairness of this measure with his pensioner constituents. Has he discussed with his other constituents the fact that when his Government left office, people on the minimum wage and hard-working parents were paying £603 a year more tax than their grandparents on the same income? Does he think that that is fair and has he discussed it with his other constituents?

[Graeme Morrice]

I refer the hon. Gentleman to my comment a few moments ago: we are talking about the proposals contained within this Bill.

Whereas some brave souls in the coalition parties were prepared yesterday to rebel over pasties and static caravans, we wait to see if any of them will speak up for millions of pensioners and join us in opposing this squeeze on pensioners’ incomes. I suspect not, and the message today on the granny tax will be clear: only the Opposition will stand up for pensioners and working people in these tough times.

--- Later in debate ---

[Graham Evans]

I am grateful to my hon. Friend for making that point on the disparity between rich and poor under the Labour Government.

I accept the point made by the hon. Member for Stretford and Urmston (Kate Green), but bringing the UK’s top rate of tax in line with other international competitors such as Italy, France and Germany, and cutting corporation tax to the lowest level in the G7, will send out a powerful message that enterprise and aspiration are valued in this country. In the spirit of the Leader of the Opposition’s recent Occupy-style hyperbole, I want the 1% to come and occupy and therefore pay tax and create jobs in the UK.

[Graeme Morrice]

The hon. Gentleman said a few moments ago that reducing the top rate from 50p to 45p raises next to nothing. We had a discourse on this in Committee yesterday, and in Prime Minister’s questions, when the Prime Minister said something similar to what the hon. Gentleman says. However, in fact, the official HMRC book confirms that the loss to the Treasury will be up to £3 billion. Should we not use that money to finance the deficit and avoid having to make draconian cuts on our pensioners?