Tax Fairness

Lord Foster of Bath Excerpts

Tuesday 12th March 2013 Commons Chamber

[The Parliamentary Under-Secretary of State for Communities and Local Government (Mr Don Foster)]

I begin by thanking those Members who gave a welcome to my hon. Friend the Member for Eastleigh (Mike Thornton). I join them by adding my own welcome.

The hon. Member for Newcastle upon Tyne North (Catherine McKinnell) is absolutely right. The debate may have been robust, but it was genuinely thoughtful. It is thus a great disappointment that when she closed the debate and the hon. Member for Nottingham East (Chris Leslie) opened it, they did not take the opportunity to apologise to the country for the Labour Government’s role in creating the economic difficulties in which we find ourselves. The hon. Member for Swansea West (Geraint Davies) was right too. On the Government Benches and in the country at large, we say “What a fine mess you’ve left us.”

I congratulate the Opposition on their proposal, because one good thing happened today: after three years of opposing our revenue-raising policies, three years of opposing our cuts and three years of failing to propose a single solution for the economic mess they left us, I am glad that in the Chamber today they have at last put forward an actual concrete policy. As we heard, it is a Liberal Democrat policy, but I am delighted that Labour Members now support our mansion tax. I shall be even more delighted when it takes pride of place in my party’s election manifesto in 2015—something I can say but they apparently cannot.

[Geraint Davies]

Will the Minister give way?

[Mr Foster]

Let me make a little progress and I will happily give way.

We have been perfectly up front: this is a matter on which the two parties in the coalition disagree. As my hon. Friend the Member for Bristol West (Stephen Williams) made clear in an excellent speech, the Conservatives have always been vocal in their opposition to such a scheme and Liberal Democrats have always been vocal in our support for it.

[Catherine McKinnell]

May I put a suggestion to the Minister? If Liberal Democrat Members support the motion and the Government bring forward proposals, they would not need to include the scheme in their next manifesto.

[Mr Foster]

I may return to the hon. Lady’s comments in a second.

We are supportive of the motion because we agree with Adam Smith, the father of free market economics. He supported higher taxes on property to reduce taxes on more industrious endeavours. We think it unfair that the richest people in the country pay the same council tax on their multi-million pound palaces as a family in a three-bedroom house in the suburbs. We agree on that.

Both parties in the coalition have been open about our disagreement, but the Opposition’s attempt to drive a wedge between us is infantile. Both parties know where we stand, and the public are clear about it too. The hon. Lady has to remember that all coalition tax policy is made by agreement between the Conservatives and the Liberal Democrats, and the mansion tax is an issue on which we simply could not agree. However much Liberal Democrats want a mansion tax, we know that the country’s economic future would be in severe jeopardy if the coalition fell apart on this issue. The country’s future is far too important for us to engage in the Opposition’s petty political games.

[Chris Leslie]

On the point about putting the coalition first, to save us a great deal of time and effort, can the Minister tell us if there is any circumstance in which he envisages that he could ever support any motion tabled by the Opposition?

[Mr Foster]

As I said, this is the first time in three years that we have had any positive proposal from the Opposition in the Chamber. If the hon. Gentleman comes forward with further proposals to help deal with the economic mess that his Government left us, we will seriously consider them.

[Sheila Gilmore]

rose—

[Mr Foster]

No, I will not give way to the hon. Lady.

It is worth reminding ourselves that although we as Liberal Democrats accept that a mansion tax would be a further step in creating greater fairness, by being part of the coalition with our Conservative colleagues we have made huge strides towards building a fairer society and a stronger economy. I agree with the hon. Members for Edinburgh East (Sheila Gilmore) and for Scunthorpe (Nic Dakin), who said that creating fairness is vital. Our achievements in doing so are in marked contrast to those of the Labour Government.

[Geraint Davies]

Will the Minister give way?

[Mr Foster]

No.

The previous Government introduced the fuel duty escalator, hitting the pockets of families and businesses, whereas we have taken steps that will make pump prices 13p per litre lower than they would have been under Labour. They abolished the 10p tax rate, hitting 800,000 single earners, whereas we are taking 2.2 million people out of paying tax altogether. Whereas in 2000 they gave pensioners a miserable 75p a week pension increase, last year we gave the biggest ever increase of £5.30 a week.

[Mr Dave Watts (St Helens North) (Lab)]

Will the Minister explain why he thinks it is fair that at the same time as they introduce the bedroom tax, the Government find money to give the richest people in the country a tax break?

[Mr Foster]

We are not here to discuss the under-occupancy arrangements. Let me remind the hon. Gentleman, who has breezed into the Chamber, that we have had discussions on many occasions about this. I am aware of 300,000-odd families with two or more spare bedrooms and 250,000 families who are overcrowded, so it is right and proper that we take action to try to help them out, and that is what we are doing. I am more than happy to talk about this Government’s record on fairness.

[Geraint Davies]

Will the Minister give way?

[Mr Foster]

No, I will not.

A number of speakers debated the 50p tax—[Interruption.]

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. Mr Davies, you have spoken. It is up to the Minister when he gives way. It is not for you to keep reminding him, saying that he should give way.

[Mr Foster]

Thank you, Mr Deputy Speaker.

It is worth repeating yet again that the Opposition put the 50p tax rate in place for a whopping 36 out of their 4,758 days in power. As my hon. Friend the Exchequer Secretary made clear, a recent review showed that the additional rate is a distortive and economically inefficient way of raising revenue. So we have decided—sensibly, in my view—that it is neither efficient nor fair to maintain a tax rate that is not effective at raising revenue from high earners and risks damaging growth. That is why we have introduced a top rate of 45p, which will be higher than the top rate that existed under Labour for all but 36 days of their 13 years in office.

It is not true to suggest, as some have done, that the Government are not requiring the wealthiest to pay more. We have continually increased the tax contribution of the richest since the election. The 2010 Budget introduced a higher rate of capital gains tax; the 2011 Budget tackled avoidance through disguised remuneration; and the 2012 Budget increased stamp duty land tax to 7% on residential properties costing £2 million or more. We are also the Government who took action in the autumn statement to reduce the cost of pensions tax relief, and we introduced a 15% rate of stamp duty for properties owned through a corporate vehicle. I am grateful to my hon. Friend the Member for Rochester and Strood (Mark Reckless) for a number of suggestions of further measures that we can take in this area, which we will certainly consider, but I can confirm that if a property is taken out of a corporate envelope, SDLT will be paid in full.

As a result of the Government’s actions, the richest pay more tax on capital gains, more stamp duty on their homes, more tax on their pension contributions, and more on income tax. As the Institute for Fiscal Studies has confirmed, the rich are now paying a higher percentage of income tax than at any time under the previous Administration. Given our measures to boost compliance, more of the tax owed will be collected. I thank the hon. Member for Scunthorpe for his praise for our work in this area.

As well as making the wealthiest in society pay more, we are asking less of the poorest in this country. As the hon. Gentleman said, we are helping the hard-working families in this country. From April 2013, the income tax personal allowance will increase yet again by £1,335 in cash terms to £9,440. This change will benefit 24 million individuals, lift an additional 1.1 million out of income tax altogether, and provide a real-terms gain of £223 a year to basic rate taxpayers.

In total, the coalition’s actions since we came into office mean that 2.2 million people under the age of 65 will have moved out of paying income tax altogether, and there is a tax cut of £600 for more than 20 million people. We are proud of the way in which we are putting fairness firmly on the agenda. As the Secretary of State for Business, Innovation and Skills said earlier today, parties should be judged on what they deliver on fairer taxes, not on what they say about them. It is deeds not words.

The Labour party when in office failed to back our mansion tax proposals, and now we are not even clear whether it is willing to include a mansion tax in its 2015 manifesto. The Liberal Democrats have made it clear that we are in favour of such a scheme, but I urge my colleagues to support the Government’s amendment, which reiterates our party’s support for the mansion tax without putting the coalition Government at risk. It is the country’s economy and people that need a strong, co-operative and working Government, which this coalition Government are providing. The do not need a Labour party playing the exact kind of cynical political games that the public so revile. The hon. Member for Ashfield (Gloria De Piero) said that the public disliked infantile Punch and Judy politics. So do I, and that is why I urge the House to support the amendment.

Question put (Standing Order No. 31(2)), That the original words stand part of the Question.