Income Tax

Oral Answers to Questions — Treasury – in the House of Commons at 10:30 am on 5 June 2008.

Alert me about debates like this

Photo of Angela Watkinson Angela Watkinson Opposition Whip (Commons) 10:30, 5 June 2008

What estimate he has made of the income distribution of the 1.1 million households which will not be fully compensated for the abolition of the 10p rate of income tax by the measures announced on 13 May 2008.

Photo of Jane Kennedy Jane Kennedy Financial Secretary, HM Treasury

The announcement that my right hon. Friend the Chancellor made on 13 May means that four in five households that stood to pay more tax as a result of the abolition of the 10p tax rate have been compensated in full, and the remaining 1.1 million will see their losses more than halved. Details of the household incomes of the 1.1 million households that are not fully compensated are set out in the memorandum to the Treasury Committee for its inquiry on Budget measures and low-income households in annexe D on page 24.

Photo of Angela Watkinson Angela Watkinson Opposition Whip (Commons)

Does the Minister find it acceptable that if we take together the abolition of the 10p tax rate, the cut in the base rate and the increase of £600 in personal allowance, the loss in income is greatest for somebody earning only £7,755?

Photo of Jane Kennedy Jane Kennedy Financial Secretary, HM Treasury

That is why, as we have said, further work is being undertaken. The Treasury Committee is conducting an inquiry into the impact of the abolition of the 10p tax rate, as the hon. Lady knows. I do not wish to pre-empt the outcome of that inquiry, but further work is being undertaken, precisely because we have been concerned about the impact.

Photo of Mike Penning Mike Penning Shadow Minister (Health)

One group of people who are not included in the Minister's figures are the workers with occupational pension schemes who had their pensions stolen from them five years ago. The Government have introduced a compensation package for them, five years on, but many pensioners on low incomes will now be taxed at 20p in the pound, not 10p in the pound, as they would have been if they had had their pensions five years ago. What are the Government going to do about this robbery of their pensions?

Photo of Jane Kennedy Jane Kennedy Financial Secretary, HM Treasury

That is rather excessive language, I think, coming from a party that dismantled the state earnings-related pension scheme, which was one of the greatest benefits to working people. As I said in my previous answer, precisely because we have been working hard to make sure that those who lose overall are compensated for the impact of the abolition of the 10p tax rate, further work is being undertaken and the Treasury Committee is taking forward its work.

Photo of Roger Williams Roger Williams Opposition Whip (Commons), Shadow Secretary of State for Wales, Shadow Minister (Environment, Food and Rural Affairs)

Mrs. Georgina Nolan wishes to stand outside the Treasury with a placard indicating that she is one of the 1.1 million people who have still not been fully compensated. She is in her early 60s, having worked all her life, and she is now feeling the pain and experiencing financial problems. She wants to be compensated now.

Photo of Jane Kennedy Jane Kennedy Financial Secretary, HM Treasury

Indeed. The changes that have been introduced will feed through into pay packets in September. It is the earliest possible change that could have been made. Mrs. Nolan ought at least to be pleased that she will see the changes taking place in September.

Photo of David Gauke David Gauke Shadow Minister (Treasury)

In the 2007 Budget, the then Chancellor made great play of the fact that from 2009 there would be only two rates of taxation on personal income, because of the alignment of income tax and national insurance contributions. Indeed, the Minister took a Bill to that effect through the House. Given the changes in the income tax threshold announced as the compensation package for the 10p tax rate losers, will that still happen in 2009, or is that yet another tax policy that will collapse before it is even implemented?

Photo of Jane Kennedy Jane Kennedy Financial Secretary, HM Treasury

In the changes that we make to national insurance, all factors are taken into account and taken in the round. That is not signalling that the hon. Gentleman should take that as a yes or a no. I am obviously not in a position to say at this point exactly what we will do when we come to consider the rate of national insurance later this year.