Clause 4

Part of Finance Bill – in a Public Bill Committee at 12:45 pm on 19th May 2009.

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Photo of Stephen Timms Stephen Timms Financial Secretary (HM Treasury) (also in the Department for Business, Innovation and Skills) 12:45 pm, 19th May 2009

As we heard, this was discussed at the Treasury Committee. If one looks at the theoretical take from the measures in the clause, the scorecard revenue that we expect to receive is 36 per cent. of that total theoretical revenue. That has been fully taken into account in the Red Book.

I understand the point about a high marginal rate over a portion of income, but the measure that the clause set outs is the right way to seek a contribution to consolidation from this group of taxpayers. It is relatively straightforward to implement. It ensures that taxpayers with incomes in this income bracket pay a maximum of £2,590 towards fiscal consolidation and it minimises the behavioural impact too. As I said earlier, the taper will operate on exactly the same principles as the familiar taper for age-related allowances. All those affected will be within the self-assessment regimes already. I do not agree that having another rate for income tax between 40 and 50 per cent. would have been better. Doing this through the personal allowance tapering and using a mechanism that is already familiar in the tax system is the appropriate way to go.

Fiscal consolidation is always difficult. Those who are asked to contribute more in the future than in the past will, understandably, have some regrets. But those whose income is at the highest end of the income spectrum have seen their incomes rise the fastest over the past decade. So it is absolutely fair to ask them to contribute rather more.