Only a few days to go: We’re raising £25,000 to keep TheyWorkForYou running and make sure people across the UK can hold their elected representatives to account.

Donate to our crowdfunder

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 8:15 pm on 28th April 2008.

Alert me about debates like this

Photo of Philip Hammond Philip Hammond Shadow Chief Secretary to the Treasury 8:15 pm, 28th April 2008

Once again, this is a case of the Prime Minister treating people as if they were fools. He knew exactly what he was doing, as did we, and, in the end, as did Labour Members. The Government only last Wednesday came kicking and screaming, dragged to admit the truth.

Every parent explains to their children that the only way to deal with a bully is to stand up to him. This Prime Minister is a bully, make no mistake—one need only ask the hon. Members for Sheffield, Hillsborough or for Hyndburn (Mr. Pope) about that. To their credit, a significant number of Labour Back Benchers rallied behind the initiative of the right hon. Member for Birkenhead in demanding compensatory measures for those who were to lose out, before the measures were implemented. I am not talking about a scrapping of the plan to double the l0p rate, but a revisiting of the wider package to restore the £700 million or so that was going to be taken from the pockets of those on the lowest incomes. They stood up to the Prime Minister and, true to form, he bottled it.

The Prime Minister offered no apology, no explanation and no recognition of the enormity of the policy that he had pursued, defended and sought to justify. The protestation that everything was cast in stone, that nothing could be revisited and that it was all in the long-term best interest of the country was forgotten in an instant. Faced with defeat, he ran up the white flag. He did so not because he had been persuaded of the argument or because he acknowledged that he was wrong, but simply to avoid a humiliation on the Floor of the House tonight. His was a tactical manoeuvre, and the right hon. Member for Birkenhead promptly claimed a victory—a victory it certainly was. The Prime Minister was humiliated. He was forced to climb down on a key proposal in the Budget that he had introduced a year earlier and in respect of which he had refused to countenance any form of compromise.

However, the top-level message that the demands of the rebels would be met, is not supported by the wording of that "slippery letter" from the Chancellor to the Chairman of the Select Committee, which is full of prevarication and procrastination. It talks about

"taking forward work to look at how we can help families without children" and

"actively looking at ways to help these groups".

It also mentions putting

"in hard work to see if those households who have lost out.. .can be helped through the mechanism that already exists" and focusing

"on potential changes to the tax credits system to allow the average losses from the removal of the 10p starting rate ... to be off-set" .

It also spoke of reporting

"on what changes could be made to the minimum wage regime ."

The right hon. Member for Birkenhead sent an e-mail to those Back Benchers who had supported his amendment, telling them that the Prime Minister had committed to compensation in full for all those who lost out and that compensation would be backdated to the beginning of this tax year. We know what it said because Jeremy Paxman helpfully read it out on "Newsnight" to the Chief Secretary, who then pointedly refused to confirm that all those affected would be compensated, that they would be compensated in full or that compensation would be backdated.

The following morning on the "Today" programme, the right hon. Member for Birkenhead, in magnanimous mood, put the Chief Secretary's prevarication down to a lack of briefing on the deal. I find that unlikely, given her usual diligence and attention to detail and given the fact that this was the life-critical issue for her Government at that point in time. We note with interest that she has decided this evening that discretion is a more attractive option than valour.

Embed this video

Copy and paste this code on your website