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Clause 3 — Abolition of starting and savings rates and creation of starting rate for savings

Part of Orders of the Day – in the House of Commons at 7:45 pm on 28th April 2008.

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Photo of Philip Hammond Philip Hammond Shadow Chief Secretary to the Treasury 7:45 pm, 28th April 2008

No, I shall make a little progress now, if I may. [Interruption.] Well, let me tell the hon. Lady what the Labour party manifesto of 1997 said. It said:

"Our long-term objective is a lower starting rate of income tax of ten pence in the pound."

When the then Chancellor introduced it in 1999, he described it as a measure

"that will make work pay and help people, especially those who are low-paid, to keep more of the money that they earn" and he went on to say:

"When we make promises, we keep them".

I was therefore surprised to see in what can only be described as the "slippery letter" of the Chancellor to the Select Committee Chairman issued last Wednesday, that the 10p rate championed by Labour in 1997 as a long-term objective is now described as having been

"introduced in 1999 as a transitional measure."

My hon. Friend Peter Bottomley also noticed that change of tone, and asked the House of Commons Library to check whether there had ever been any reference to the 10p rate being transitional prior to the 2007 Budget. The Library's answer was clear:

"No. It does not appear to have been described that way."

Therefore, it is not any longer a "long-term objective", and not any more a step

"that will make work pay and help people...to keep more of the money that they earn", but now, after the Government have abolished it, it was apparently a mere transitional measure. This is not so much a question of,

"When we make promises, we keep them", but more a question of, "When we make promises, we'll spin and we'll twist and we'll duck and we'll weave to cover our tracks as we break them."

In fact, the statement that the rate was introduced in 1999 as a transitional measure is, to put it bluntly, a terminological inexactitude. If it had been uttered in this Chamber, rather than in a letter, the Chancellor would have been forced to withdraw it. It is a rewriting of history that would make Stalin blush; a long-term policy objective has been airbrushed out to become a mere footnote—a transitional measure of no lasting importance.

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