New Clause 9 — Lower rate of tax and mansion tax

Part of Finance Bill (Ways and Means) – in the House of Commons at 7:15 pm on 1st July 2013.

Alert me about debates like this

Photo of David Wright David Wright Labour, Telford 7:15 pm, 1st July 2013

I was in the Chamber at the opening of the debate, and I would like to make a brief contribution on this subject. I am keen to see us move the debate forward a little on the issue of progressive taxation. My hon. Friend Chris Evans was right to say that the Labour party was wrong to abandon the 10p tax rate before the last election, as it caused a good deal of concern in constituencies right across the country. It is important that we reassess that policy position now.

It is useful that we are matching the commitment to reintroduce the 10% band with a proposal for a mansion tax, linking the two objectives, and I am particularly supportive of the mansion tax. As we heard in an earlier segment of the debate, one of the key issues is tax avoidance, and Government Members made great play of the fact that the higher rate of income tax introduced at the end of the last Labour Government was not going to deliver much revenue because people would attempt to avoid it. I can understand that argument, but I think they are wrong, because we did not have a long enough period to see it work though, and not enough time was given to allow the new top rate we brought in to bed down.

One thing that can be said of the mansion tax is that one can with certainty ensure that income is being delivered for the Exchequer. Clearly, by their very nature, properties do not move. Some Members have referred to the possibility of revaluation of the council tax base. I do not think that there should be a broad revaluation in England at this stage, but I do think that it would be logical to apply a mansion tax to the largest properties in the country, given the need to generate a tax system that is fair and progressive.

During the financial crisis that arose before the last general election, the Labour Government had to move dynamically to ensure that the banks did not collapse. The current Government have made great play of claiming that the deficit was generated by the last Labour Government’s spending priorities over a long period, but that, of course, is nonsense. The Labour Government had to step in to tackle a global financial crisis which had largely begun in the United States as a result of the sub-prime mortgage market. Had they not acted, some very large banks in this country would have gone to the wall, and further difficulties would have resulted from that. We have a significant deficit because the last Labour Government had to secure the stability of the financial sector.

Recovering from that situation, which any Government elected in 2010 would have had to attempt to do, requires society to share the burden. That is why the last Labour Government proposed a higher top rate of income tax than they had proposed during most of their time in office. They understood that the burden must be shared across income ranges, and that those with the broadest shoulders must pay the most if the deficit was to be reduced.

As my hon. Friend the Member for Islwyn said, a mansion tax would enable us to rectify one of the mistakes that were made towards the end of the last Labour Government’s period in office. It would allow us to introduce a 10% rate, thus creating a progressive tax system under which those at the top of the tax tree would pay their fair share, and those on lower incomes would have a chance to put more money in their pockets and into the economy. The richest members of society do not have to spend all their incomes and assets on products in the economy, but those on the lowest incomes invariably have to spend nearly all, if not all, their incomes in that way. By spending money in the economy, they secure demand in the economy, and that generates growth.

The new clause has three positive aspects. It is progressive because it would tackle people with larger properties; it makes a welcome commitment to the reintroduction of a tax rate that we should have been retained; and it ensures that those who are most able to spend money in the economy—and who spend most of their incomes in that way—spend it in their local communities, thus generating demand and therefore growth.