Oral Answers to Questions
Harriett Baldwin Excerpts(11 years, 1 month ago)
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Mr George Osborne
I shall take that as a Budget representation. To be fair to the hon. Gentleman, he is always a powerful champion of the ceramics industry in his constituency.
Harriett Baldwin (West Worcestershire) (Con)
My constituents find it much easier to take out a payday loan than to open a savings account. What steps are the Government taking to make it much more difficult for my constituents to fall into that sort of temptation?
Sajid Javid
My hon. Friend will know that the Government commissioned an independent report from Bristol university on the high interest lending industry. That report shows severe consumer detriment and we have already taken action. We announced last week that we will be working on advertising content and placement, and we will be giving extra powers to the Financial Conduct Authority to impose fines and to close down firms in the most significant cases. She may have seen that last week the Office of Fair Trading announced it is investigating a number of firms: it has told a number of payday firms that they have 12 weeks to shape up; otherwise it will take severe action.
Tax Fairness
Harriett Baldwin Excerpts(11 years, 1 month ago)
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Chris Leslie
The hon. Gentleman really needs to focus on the issue at hand. If he is standing up for the millionaires’ tax cut, he should simply say so. It will take effect in about three weeks’ time, and a number of his constituents will be absolutely astonished that he has voted for an average £100,000 tax cut for millionaires while they have lost their tax credits, found themselves paying more and seen a decline in the quality of public services.
Harriett Baldwin (West Worcestershire) (Con)
I am sure that the massed ranks of the shadow Minister’s colleagues behind him today would like to know whether he will pledge to increase the top rate of tax to 50p in his manifesto.
Chris Leslie
We certainly voted against the tax cut, and if we were in government now, we would not be cutting that 50p rate to 45p in April. Heaven only knows what other horrors the Government have in store over the next two years. We do not know what kind of situation we are going to inherit in regard to the deficit and to borrowing, so it is impossible to predict the tax situation that we will be faced with, if and when we inherit that position at the next general election.
Oral Answers to Questions
Harriett Baldwin Excerpts(11 years, 3 months ago)
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Sajid Javid
The hon. Gentleman raises a very specific issue. I think he will understand that I have not looked at that particular concern of his constituent, but I will be happy to look at it in more detail if he provides me with more information.
Harriett Baldwin (West Worcestershire) (Con)
Can the Minister explain why, at a time when we are having to make such difficult decisions on public spending, it is fair to argue, as Labour does, that we should pay child benefit to millionaires?
Sajid Javid
My hon. Friend raises a very important point. In the 13 years of the previous Government, the welfare budget went up by 62% in real terms; it was out of control. If we are going to deal with the problem that they left behind, we have to make sure that everyone makes a contribution.
Income Tax
Harriett Baldwin Excerpts(11 years, 5 months ago)
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Harriett Baldwin (West Worcestershire) (Con)
It was a privilege to be present for the maiden speech of the hon. Member for Cardiff South and Penarth (Stephen Doughty), who spoke eloquently and passionately about his local area. The picture that he painted has made me eager to take the first possible opportunity to visit his constituency.
Let me begin with a small maths problem that I often pose to students in my constituency. If income tax rates were set at zero, how much income tax would the Chancellor raise? The students always get the answer right: it is zero. I then ask this question: if the Chancellor set the income tax rate at 100%, how much more income tax would he raise? Usually, someone will put his or her hand up and say, “He would raise a lot more.” I should welcome an intervention from any Opposition Member who has a view on how much income tax the Chancellor would raise if the rate was set at 100%.
Sheila Gilmore
Giving such an extreme and ridiculous example is unhelpful, as I think the hon. Lady is well aware. No Opposition Member is suggesting that the income tax rate should be 100%.
Harriett Baldwin
I seem to recall that in my lifetime—under the Government of, I think, the predecessor but one of the hon. Member for Cardiff South and Penarth—income tax was set at more than 90%. If it were set at 100%, we should have no income tax revenue, because no one would consider it worth while to work.
I then ask my students what would happen if we lowered the rate of income tax from 100% to 70%. Would we raise more or less revenue? Again, I should welcome interventions from Opposition Members. Everyone realises that we would raise more revenue, because if the rate was 70%, we would take home 30p in the pound. I notice that the new socialist Government across the channel recently introduced that income tax rate. We will see how that stacks up over time, but I expect that it will prove to be a deterrent to additional work, too.
The motion contains the seeds of its own mathematical inconsistency, because the Opposition are extrapolating a linear relationship between the income tax rate and the amount of income tax revenue raised. They are also extrapolating that those who can, in what is a global market, take their labour to any other country in the world will not take into account any difference in tax rates between the UK and other nations, yet all the evidence shows that that is not the case.
The Labour motion refers to 8,000 people paying income tax on income of £1 million or more. In 2009-10, which is the last tax year in which we had the 40p tax rate, some 16,000 people had an income of £1 million or more. Through raising the tax rate from 40p—a rate that was in place for all but one month of Labour’s entire 13 years in office—we can see that millionaires can do other things with their income. They can take their entire labour overseas, or they can decide to shelter their income or not to take a dividend that year, or they can use any of the other methods to ensure they do not pay that increase in income tax. There was a reduction of £7 billion in revenue after the income tax rate went up from 40p to 50p.
Harriett Baldwin
I think that I have already taken two interventions, and I have only a minute and a half, unfortunately.
The Government have reduced the number of ways in which people on high incomes can reduce their taxable earnings. The Opposition opposed measures to reduce the amount people could put into their pension fund from more than £250,000 to £50,000. I also voted for the abolition of disguised remuneration, which was quite rampant under the previous Government. That also serves to limit the ways in which people on high incomes can reduce the amount of income tax that they pay.
The relationship between the rate of income tax and the amount of revenue raised by the Chancellor is non-linear. Between 0% and 100% there is a curve, and we need to agree about the optimal point on it—the point where the Treasury can get the most revenue from those at the highest end of the income spectrum. I suspect that 45p will be a lot closer to that optimal rate than 50p was.
The Government are focusing on tax cuts for those who are on the lowest incomes, lifting them out of income tax, and ending this tax cull on millionaires.
Oral Answers to Questions
Harriett Baldwin Excerpts(11 years, 6 months ago)
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Sajid Javid
The hon. Gentleman will know that the Government have introduced a permanent tax on bank balance sheets, which will raise far more than a bank bonus tax. If he is interested in the fiscal action the Government are taking to create jobs, maybe he can tell his constituents about the brownfield allowance the Government introduced for North sea oilfields a couple of months ago. A few weeks later there was investment of £1.6 billion, creating up to 2,000 jobs in Scotland and beyond.
Harriett Baldwin (West Worcestershire) (Con)
One of the fiscal measures that best increases the incentive to find work for those who have been out of work for a long time is the benefit cap. Is the Minister surprised to learn that this morning a measure that will save the taxpayer half a billion pounds over the next two years and greatly increase the incentives to work was voted against by the Labour party?
Sajid Javid
I thank my hon. Friend for bringing that to the House’s attention, and I am not surprised to learn it, given Labour’s opposition to the benefit cap. The Government are determined to make the welfare system work in order to help people find employment, and that includes the benefit cap as well as the introduction of universal credit.
Multiannual Financial Framework
Harriett Baldwin Excerpts(11 years, 6 months ago)
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Chris Bryant
I do not want to give way to lots of people, as that would steal away time from others, but I can never resist the hon. Member for West Worcestershire (Harriett Baldwin).
Harriett Baldwin
On the subject of big-ticket items, will the hon. Gentleman confirm that, when he was Minister for Europe, the previous Government signed up to the euro bail-out mechanism? It was the present Government who had to negotiate us out of that mechanism.
Chris Bryant
The hon. Lady praises me far too much. I was Minister for Europe for about 2.5 seconds. In those 2.5 seconds, however, the one thing that I argued aggressively with my socialist friends and with my European People’s party friends—with whom her party used to be friends—was that the next multiannual round had to be lower than before and should not have an inflationary increase. I am afraid that the hon. Lady is pitching at the wrong person in this particular round.
I believe that there is a role for the EU budget and it should relate to growth, research and development. There are some things where we can do more together as a continent and add value. Unfortunately, however, those are not the issues that grab the attention of the French, the Germans, the Italians and the Spaniards. That is why we have to, and have always had to, build alliances with other countries, particularly the smaller countries.
Changes to the Budget
Harriett Baldwin Excerpts(11 years, 11 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 Gauke
Given that the policy does not come into effect until 1 October, we do not think any damage will have been done through the policy. We think that addressing the anomalies is the right thing to do, and we have taken the opportunity to improve the policy we initially announced.
Harriett Baldwin (West Worcestershire) (Con)
Evidently, the most urgent question relating to the Budget changes are those to VAT on static caravans and hot pastries, while across the channel we literally have financial Armageddon happening. What would the Minister contrast between the management of this country’s finances and the management of those of Europe?
Oral Answers to Questions
Harriett Baldwin Excerpts(12 years ago)
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Mr Hoban
We have heard the same old stuff from the hon. Gentleman for the last 42 years. Perhaps it is time for him to help youth unemployment by creating a vacancy. We are providing young people with more help to get into work, with an extra quarter of a million apprenticeship places. I would have thought he would have welcomed the fact that the city of Sheffield enterprise zone is at Markham vale in his constituency. That is the sort of practical action this Government are taking to ensure that jobs are being created.
Harriett Baldwin (West Worcestershire) (Con)
Will the Minister explain to employers—in Bolsover and elsewhere—that as of this month there is a youth contract that will pay them to take on unemployed young people?
Finance (No. 4) Bill
Harriett Baldwin Excerpts(12 years ago)
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Rachel Reeves
I will make some progress.
For the reasons that I have given, pensioners from the National Pensioners Convention have come to Parliament today to lobby MPs to vote against the change. Let us take each issue in turn and consider who will be hit, because there has been some myth making by defenders of the granny tax about how only well-off pensioners will be affected. The truth is, those who will be hit have very modest incomes.
Harriett Baldwin (West Worcestershire) (Con)
The hon. Lady refers to the “granny tax”. I know that she, like me, would really like to see older women retiring with the same income as men over time. Does she therefore accept that 60% of the effect of the freezing of the age-related allowance will be on men and 40% on women, so it should not really be referred to as a granny tax?
Rachel Reeves
The money involved will not alleviate the pressure on women in retirement. It will all be used to give a tax cut of £40,000 to 14,000 millionaires. The hon. Lady talks about women in retirement, and it was Government Members who voted to increase the state pension age for women with just five or six years’ notice, hitting them by up to £15,000 in lost retirement income. We will not take any lectures from them about the matter.
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.
Alison McGovern
That point was very well made. I am never surprised by the ability of people to brush over things. We have heard this afternoon that this is a minor technical change. As I said, I am quoting the BBC itself—[Laughter.] I know that Conservative Members are not always the greatest fans of the BBC, but it states that
“it is a ‘middle-income’ range of 40% of pensioners who will not get what they might have expected from the tax system.”
Harriett Baldwin
Much as we all love and admire the BBC, not everything that it puts on its website to do with benefit changes is accurate. I am sure that the hon. Lady would want to find a more reliable source.
Alison McGovern
Would the hon. Lady like to intervene on me again, then, and say what proportion of pensioners will be affected, if she thinks the BBC is unreliable?
Harriett Baldwin
A BBC website had a wholly inaccurate story yesterday about the changes to employment and support allowance, so it is not an accurate source. That is the point I am trying to make.
Alison McGovern
Is the hon. Lady therefore saying that the proportion is not 40%? She indicates that she does not know—that is fine.
Mr Jackson
I defer to the parliamentary private secretary to the Financial Secretary, my hon. Friend the Member for Reading West (Alok Sharma). [Interruption.] At least he is at the moment.
The hon. Member for Denton and Reddish (Andrew Gwynne) made a very important point about crossing the Rubicon of undermining the universality of child benefit. The same point was made earlier by my hon. Friend the Member for Christchurch. Some time ago, the Child Poverty Action Group said this about child benefit:
“A benefit which goes to virtually all children is of course expensive. But it can also be argued that it is more likely that such a benefit will have ‘substantial and wide-ranging support’, and may be difficult to abolish; provision for the poorest children only, whilst cheaper, is often more precarious.”
Specifically, intergenerational redistribution and the value placed on children are universal values that we are seeking to undermine.
Harriett Baldwin
What would my hon. Friend say, though, about the example of two wealthy Americans who have four children born in this country who receive child benefit tax-free from the UK Treasury, but have to pay tax on it to the internal revenue service?
Mr Jackson
My hon. Friend makes a valid point and I accept her argument, but we need to look at this proposal within the context of the wider proposals in the Budget. We are rightly reducing the top rate of tax and corporation tax, so for those in the upper 20% income range we have introduced fiscal policies through which we seek to support entrepreneurship and business, supporting those higher-rate earners. We are also proud to be taking a substantial number of poorly paid working people out of tax. My concern is that we are not extending those same tax breaks to the squeezed middle and it is a very important message that we are sending. I accept that the Chancellor has tackled the specific issue of the cliff-edge effect, but he has not done enough to secure my vote in terms of the discrepancy regarding the one taxpayer in a two-person household.
Finance (No. 4) Bill
Harriett Baldwin Excerpts(12 years ago)
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Owen Smith
I do not know how many times I need to keep telling the hon. Gentleman this, but the simple answer is no. He should turn to page 2 of the document, which clearly says that this rate raised £1 billion; he should turn to page 39, which says that it raised £1.1 billion; he should turn to page 51, which says that it will rise to £3.1 billion next year. These would be the static costs. It goes on to say—[Interruption.] No, £1.1 billion is the actual amount lost to the national accounts as a result of this change. That is a fact. It is not uncertain; it is a fact. The Treasury thinks that the money would have gone up to £3 billion, rising to £4 billion subsequently.
Harriett Baldwin
Can the hon. Gentleman confirm that his party’s next manifesto will contain a pledge to restore the 50p rate?
Owen Smith
When we get close enough to the next election to write our manifesto, we will write it, and the hon. Lady will be able to see it then. That is the simple answer to her question. Can she tell us exactly what will be in her party’s manifesto at this stage? I do not think so, and I do not intend to tell her what will be in ours. We will decide.
I wonder what the Tory manifesto will say about the NHS and VAT at the next election. I suspect that it will not say that the Tories will look after the former or fail to increase the latter, because no one would believe them any longer, would they?
Let us be clear. The document says that £3 billion would be the static cost of a cut in the rate to 45p. It also says that the behavioural change based on the magic of Arthur Laffer’s cocktail napkin calculus would generate £2.9 billion. Unfortunately, as I have said, HMRC is not terribly certain about that, which is why it has covered its rear so often.
I promised to give the Committee a few examples of the use of the words “uncertain” and “uncertainty”, which occur more than 30 times in the document, and I cannot resist doing so, because they are so juicy. The document states that
“the yield estimates were highly uncertain.”
It states:
“There is considerable uncertainty over the true level of the elasticity.”
It states:
“The incompleteness of returns at this stage gives the results and conclusions a margin of uncertainty.”
In fact, there is so much uncertainty in it that there is a separate section entitled “Areas of uncertainty”. My personal favourite appears on page 38, where uncertainty is expressed about the uncertainty. In an attempt to estimate the behavioural effects, the document states:
“The level of uncertainty associated with this estimate is therefore driven by the uncertainty of all the other stages described above.”
Why is the document so uncertain? The reason, in short, is taxable income elasticity or TIE. The Treasury decided that the appropriate TIE for the calculation of a £100 million loss was 0.45; not the standard number that the previous Treasury had used, 0.35, and not—I look forward to an intervention on this point—the standard numbers used in the vast welter of academic research which puts a delta at between 0.12 and 0.4. The figure of 0.46, which is used in this Treasury document, is at the very top end of the possible delta. Even if it were true that 0.45 is appropriate, however, the uncertainty would still be enormous. All we need do is shift the figure slightly to 0.35, and what do we find? Not a £100 million loss, but a loss of £700 million. If we shift it nearer to the 0.12 that has been used in many United States studies, we see a loss to the tune of between £3 billion and £4 billion.
Paul Johnson, director of the Institute for Fiscal Studies, told the Treasury Committee, whose report was published only today, that the Treasury’s
“central estimate… is incredibly uncertain, to the extent that we think that its estimate suggests there is only a two-thirds probability that a revenue-maximising rate lies between 30 per cent and 75 per cent.”
That is what the IFS had to say about what the optimal rate might be on the basis of the Treasury’s calculus. Mr Johnson continued:
“Those numbers are absurd in some sense, but that gives you a sense of the level of numbers of assumption and uncertainty that underlie what”
the Treasury
“has done.”
Elizabeth Truss
It was the highest income tax rate in the G20. We heard earlier from the Opposition spokesman that Labour did not understand the effect that that would have on our international competitiveness, which shows why it is not fit for office.
Harriett Baldwin
Did my hon. Friend share my shock at hearing the Opposition Front-Bench spokesman arguing that the sensitivity of the top rate of tax is static? The logic of that argument is that the top rate should be 75p, 80p, 90p or, perhaps, even 100%.
Elizabeth Truss
Yes, and perhaps some Opposition Front-Bench Members should move to France, where they might find that such policies are more conducive to their way of thinking.
At this time of increased international competition and great movements of people and capital around the world, and with new economies rising such as in India and China, according to the World Economic Forum Britain is 94th in the world in respect of the effect and extent of our taxation. One factor in that is the top rate of tax under the previous Government, and another is the extremely long tax code, which is a result of their meddling with our tax system over many years.
The UK is 11% less productive than the G7 average, and our skills base is lower than that of the US, France and Germany. If we are to become competitive again and improve our productivity and skills, we need incentives for people in this country to work and to invest in their skills, and we need to rebalance the tax system away from income tax and taxes on work such as national insurance, which the previous Government increased. We also need to reform our education and welfare systems and take the 2 million lowest earners out of tax, in order to give everybody more incentive to work. We must also merge our income tax and national insurance system to make things simpler for employers. We need to get rid of the previous Government’s flagship 50p tax rate as well, as it has done so much damage to people in this country who are seeking to work, to invest and to be part of building our future economy.
The Government have made it clear that we want shareholders to have proper control over executive pay in their companies, and that must happen. People must be rewarded in line with the skills they use, the risks they take and the income they generate. We need incentives for people to set up businesses, and to create and produce more. We also need to look outside Britain and see what the rest of the world is doing. We need to move away from the myopic approach that it does not matter what is going on elsewhere. If our country takes that approach, we will not succeed.
Harriett Baldwin
I am listening to my hon. Friend’s excellent speech with great interest because of his expertise as a tax accountant.
Harriett Baldwin
Tax lawyer even. Was he as surprised as I was at the £16 billion to £18 billion of forestalling measures taken after it was preannounced that the rate would rise to 50p?
Charlie Elphicke
Very much so. My hon. Friend makes a good point. It is also in the OBR report. These are the forestalling measures—[Interruption.] Labour assumes that people forestall for only one year and that the income will suddenly pop up the following year. That is not what really happens. Often people will take a long career break. [Interruption.] I shall give the hon. Member for Pontypridd, who is chuntering from a sedentary position—