Clause 4

Part of Finance Bill – in a Public Bill Committee at 12:30 pm on 19th May 2009.

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Photo of John Pugh John Pugh Shadow Minister (Treasury) 12:30 pm, 19th May 2009

I have a few brief comments. Regarding the points made by the Government about complexity, hon. Members will recall that the Liberal Democrats’ proposal was targeted at those people earning £100,000 and more. It was abandoned at a celebrated occasion at a party conference, when we made what was called the green tax switch. The Government have a different way of doing it—they have a less severe redistribution in their proposal than in ours. The reasons why the Lib Dems modified their position are the very issues that I would like the Minister to address now.

It has been suggested that if we introduce such a proposal, people who are in the unfortunate category of earning £100,000, looking with envy at the people who earn £98,000, will simply find a way to take their reward via other means such as capital gains. It was also argued, when we changed our position apropos the higher tax band, that some of the gains in redistribution would ultimately be somewhat spurious. Some of the reductions in social inequity that would follow were probably more imagined than real. Will the Minister familiarise me with his thinking about those proposals in terms of their effects on tax avoidance and people taking their reward in different ways? The Minister may well acknowledge a genuine redistribution urge here, but what does he think the proposals will do to low incomes?