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Clause 2 - Personal allowance for 2013-14 for those born after 5 April 1948

Finance (No. 2) Bill – in a Public Bill Committee on 23rd April 2013.

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Amendment proposed (this day): 7, in clause 2, page 2, line 6, at end add—

‘(3) The Chancellor of the Exchequer shall review the impact of this measure on anyone who reached the age of 65 on or after April 2013, and place a copy in the Library of the House of Commons within six months of Royal Assent.’.—(Catherine McKinnell.)

Question again proposed, That the amendment be made.

Photo of David Crausby David Crausby Labour, Bolton North East

I remind the Committee that with this we are discussing the following:

Amendment 8, in clause 2, page 2, line 6, at end add—

‘(3) The Chancellor shall review the overall impact of the Government’s overall budgetary measures on the living standards of basic rate taxpayers and place a copy of this review in the Library of the House of Commons within six months of Royal Assent.’.

Clause stand part.

Photo of Sheila Gilmore Sheila Gilmore Labour, Edinburgh East

The Finance Bill has to be one of the most important pieces of legislation for the Government in any parliamentary year, which makes it all the more extraordinary that, on Second Reading and in Committee of the whole House last week, Government Back Benchers seemed uninterested in the Bill. That is not the case now we are in the Committee Room, as we have seen from the lively interventions that have been made.

The point I was making before the Committee adjourned this morning was that one thing that Governments need to do constantly, and are urged to do by bodies such as the Resolution Foundation, is to look at the overall impact of what is happening and to ask themselves whether a certain way of proceeding is the best or indeed the only way of helping the people they want to help. We hear from both sides of the House—at least, officially—the profession that we want to help those  who are least well off, and that that is the goal of Government policy. The conclusion that the Resolution Foundation reached when comparing and contrasting the raising of the tax allowance with altering the earnings disregard in relation to universal credit—although the same argument would prevail if universal credit does not get rolled out fully this year—was that, simply in terms of helping working families on low and middle incomes, raising the universal credit disregard was 15 times as effective as raising the tax allowance.

If, therefore, we are genuine when we say that our primary focus is on the least well-off—as has been argued in relation to the raising of tax allowances in particular—that sort of comparison is what we need, and what the review proposed by amendment 8 would seek from the Government. They should look seriously at the impact of their measures, not just to review what has been done but, crucially, to look forward to policy in future Finance Bills, and to work out where we are going on the issue of the tax allowance.

One particular argument has been made repeatedly during post-Budget debates, although less so last week, mainly because Government Back Benchers did not speak very much. The Government have been very keen to point to some—not all—parts of the impact assessment carried out by the Institute for Fiscal Studies. In particular, they constantly ask us to look at the fact that the biggest impact of their benefit and tax measures since 2010 has been on the top 10%; therefore, it is argued, the measures must be fair. I have a few problems with that. First—and I have not noticed this point being discussed by anyone else, so I hope the Minister will be able to answer it—when the IFS makes that statement, the calculations used take into account everything that has happened since the pre-election Budget of 2010, including the additional 50p tax rate and the subsequent reduction of that rate to 45p. But we are told constantly by Ministers that the 50p tax rate did not actually raise any money. If it did not raise any money, it could not have had an impact on the income of people at the top of the income scale. Either it did raise money and so had an impact, or it did not raise money and so did not have an impact.

Photo of Fiona O'Donnell Fiona O'Donnell Labour, East Lothian

It is not often I speak in defence of millionaires, but was it not also very insulting to say that the change in tax rate would incentivise the rich to be honest, therefore implying that, as a class, they are dishonest in their tax affairs?

Photo of Sheila Gilmore Sheila Gilmore Labour, Edinburgh East

I thank my hon. Friend for her intervention. That justification—that people were not paying the 50p rate—is staggering. If that suggestion were made in reverse about people falsely claiming benefits, a rather different view would be taken. If people were not paying the 50p rate, we should have looked at how it could be improved. We should not have said, “Oh, that’s all right then. It is not getting us any money, so we will just get rid of it.”

Photo of Paul Uppal Paul Uppal Conservative, Wolverhampton South West

Just to enlighten Opposition Members, people who earn that kind of money tend to have quite liquid assets, so they might declare their income shorter on this side and use other income as capital. That is the problem we have with incredibly high net worth individuals.

Photo of Sheila Gilmore Sheila Gilmore Labour, Edinburgh East

We may be talking about incredibly high net worth individuals, but the 50p tax rate—now the 45p tax rate—does not just apply to the kind of incredibly high net worth individuals who can move away. A deliberate decision was made to pitch it at the level it was pitched. Although it affects only a very small proportion of the population—we know that the median wage sits way down the scale in relation to it—it includes a number of people who cannot simply up sticks and go somewhere else. That argument is put forward—not always with great numbers, but with a few anecdotes—but it is not a good enough reason for saying that we should abandon a tax rate that might be of assistance.

Photo of Kwasi Kwarteng Kwasi Kwarteng Conservative, Spelthorne

Is the hon. Lady suggesting that we should increase taxes further because those people are not going to go away?

Photo of Sheila Gilmore Sheila Gilmore Labour, Edinburgh East

As I said on Second Reading to one of the hon. Gentleman’s colleagues—I am afraid that the audience for what I said was quite small—that is the old Laffer curve argument: if tax rates are set at zero, nothing will be collected; if tax rates are set at 100%, people will be so disincentivised that nothing will be collected. The question is, at what point in between should tax rates be set? That will always be a matter for debate. When I researched the Laffer curve to find out how many people had written on it, I found that there is remarkably little research evidence—far less than I had imagined. It is so often thrown around that I had assumed everybody understood it and it was well researched. When we have that discussion, we could clearly debate at what point in the spectrum it should be set.

Like every Government, we are trying to do various things. We want to deal with a deficit in Government finances—nobody has said that we do not—and we want to make sure that what we do is fair. Those are the balancing factors. Some of us would argue that some of the measures that the Government have looked at are far less fair than they might be.

Photo of Rory Stewart Rory Stewart Conservative, Penrith and The Border

I apologise if I have missed this in the hon. Lady’s speech, but will she clarify the previous Government’s rationale for setting the top rate of tax at 50%?

Photo of Sheila Gilmore Sheila Gilmore Labour, Edinburgh East

Like the hon. Gentleman, I was not a Member of this House at that time, and I was not involved in the debates and discussions that took place. In my party—I am sure it is the same in the hon. Gentleman’s party—we discuss these issues, and we often disagree. Some of us had views that were not the majority view—even at the time of the previous Government—about how to set tax rates. But it is clear that the big difference that we have been faced with since 2010 is that there is a gap between Government income and Government expenditure. One of the reasons for that is that Government income fell quite substantially as a result of the recession, as we all know. When individuals lose their jobs, they pay less tax, businesses make less profit, and Government income drops. We also believe, though clearly not everybody accepts, that stimulating the economy during a recession is a positive move.

The decision to raise the rate from 40p was taken in that context. However, it is a debate we need to have constantly. We need to think about how we can fund the things we want to do and on whose shoulders the burden should rest. The IFS said that those on the highest income are bearing the greatest proportion as well as the greatest cash amount and that, therefore, that makes the rest of it all right. I genuinely question that. I think the IFS was looking prospectively at what the impact should be of various measures. I wonder what the out-turn might be regarding the impact on that top group. If they are not really being affected by this tax, the impact will not be as the IFS modelled it in advance.

That is another reason for looking in more detail than at the time of last year’s Budget to review the impact of that additional tax rate. It was measured over a very short period. It is always necessary to look at the overall impact of budgetary measures on living standards. We have asked to look in particular at the living standards of basic rate taxpayers. Even if the IFS figure is an out-turn as well as a prospective one, it still remains the case that to lose 10% of an income in excess of £150,000 or £200,000 is very different from losing 10% or even 5% of a much lower income. That is where the cash terms and the impact on spending power matter.

There is also an impact on the wider economy. One thing that is driving the ongoing recession and causing the economy to stagnate is the fall in living standards. People have less money in their pockets to spend in the way they previously did. I was speaking to a constituent recently whose husband is a taxi driver. He is self-employed and they are not particularly well off but they have seen a substantial drop in income, because, as she said, people are not going out as much. When people are not having as many nights out they are not using taxis as often. They have seen a real reduction in their income because other people have seen a reduction in their disposable income. And on it goes. The path we are marching down will take us back to a bad position.

This is not just about fairness, although that is hugely important. There is also the economic impact of what is happening. The spending power of millions of people is powerful in an economy. I am sure others will be able to give local examples, like the one I have given, showing how important it is that people are able to spend.

At the lower end of the income scale, it is not good enough to say that all is fine because we are raising the income tax threshold and that is the best way to make them better off. People sitting at home are not saying, “This is great and fantastic. Look at how much more money I have got.” They know they have not got very much more money. In fact, on average basic rate taxpayers have less money than before due to measures such as the rise in VAT, price rises and the loss of important benefits.

Child benefit, which goes to every family with children except those earning more than £50,000, has been frozen since 2010. That has an impact on the amount of money coming into households with children. Even before the recent changes, about which there has been some debate, tax credits were frozen prior to the 1% increase introduced by the Welfare Benefits Up-rating Act 2013. Despite having said that they were keen to help working families, the Government froze tax credits. If that happens for two or three years on the trot, it will  have an impact. Other people have lost considerable amounts of tax credits because they have dropped off the top end. Because the Government have taken the taper down faster than before and taken away part of tax credits with the change from 80% to 70%, many working families have lost considerable amounts over the past three years. That must be weighed against the question of tax allowances.

We are trying to reduce the deficit and get the economy back on track, and the decision to raise tax allowances has a substantial impact on Government finances. Some Government Members have argued, and I respect them for this, that it is morally right to leave people with their income rather than paying out tax credits, so, in one sense, they would make the change anyway. That is a point of view that we can debate and perhaps disagree on. The measure does not simply take out of tax the people at the lower margin; it removes all basic rate taxpayers, so the total cost to the Government, who are strapped for cash, is quite considerable. Presumably, Ministers had that equation in their head when they drafted the proposals. Their view must have been that it was the right thing to do, even though it would cost the Treasury a considerable amount.

Photo of Rory Stewart Rory Stewart Conservative, Penrith and The Border 2:15 pm, 23rd April 2013

One argument that the hon. Lady might like to consider is that apart from the revenue implications, the psychological impact of taking low-paid people out of tax is considerable. The sense that going to work will drag them into a tax trap is a serious barrier to getting work for many people in my constituency and, I am sure, in hers. There might be a good argument for raising the level to £16,000, or the average income. The amount of revenue that the Government derive from such taxation is relatively modest, but it puts considerable psychological obstacles in people’s way.

Photo of Sheila Gilmore Sheila Gilmore Labour, Edinburgh East

I suspect that it is not correct to say that such income is relatively modest. During the 1970s, one issue in the political and financial debate that led, I believe, to the outcome of the 1979 general election was the fact that many people—those on the basic rate of tax as well as those on higher rates—felt that tax rates were higher than they would like. At the time, I criticised the Government for that, because it is very easy to take a penny off millions of people and get quite a lot.

Putting up the tax threshold is an expensive business, and if the Government want to do so, they must take on board the overall costs and balance them against what people are getting. In my experience, tax issues are not the biggest barrier to work for many people. Many other problems affect people considerably, including the cost of rent in the private rented sector and the cost of child care, especially since child care tax credits have been cut. They pose equal barriers to work, and perhaps the Government should tackle all of them.

Photo of Ian Mearns Ian Mearns Labour, Gateshead

When my hon. Friend the Member for Newcastle upon Tyne North made her contribution, Government Members seemed to pooh-pooh the idea that the tax cut created by raising the threshold was offset by more regressive measures such as the increase in VAT. I remind them that in 2009, somebody they know and love dearly said:

“You could try, as you say, to put it on VAT, sales tax, but again if you look at the effect of sales tax, it’s very regressive, it hits the poorest the hardest. It does, I absolutely promise you…VAT is a more regressive tax than income tax or council tax.”

That was none other than David Cameron, now the Prime Minister.

Photo of Sheila Gilmore Sheila Gilmore Labour, Edinburgh East

I thank my hon. Friend for his comments, which are helpful in trying to make the assessment we want the Government to make. If we are wrong and the Government are right, any review would presumably show that the overall impact of their Budget measures on the living standards of basic rate taxpayers was positive. They will have a good news story to tell if they are correct, so their resistance to a review is not clear. It may be because they suspect that the studies that have been done by the IFS and others are right, and that basic rate taxpayers, particularly those at the bottom of the income scale, have not benefited as much as they would like people to believe.

Every time we say that people have dropped out of tax, we should remember that once they are out of tax, they get no further benefit. It is like the myth of the council tax freeze. The council tax freeze is always supposed to help the most hard-pressed. However, because of council tax benefit, and even with the changes that are coming in England this year—not yet in Scotland—a lot of people in all our communities are not paying any council tax because we previously considered that they did not have enough income to do so. They get no benefit whatsoever from the council tax freeze. In Scotland that is almost six years of the people on the lowest income having no benefit whatsoever, including a lot of pensioners because many of them receive council tax benefit. Because they are the greatest users of council services, they have seen the downside of all that, which is that councils find it more difficult to provide the level of service they would like to provide. In some cases, they are putting up charges. Social care has been reduced in quality and time. That is happening in Scotland as well. Anybody who believes that we have somehow cracked the issue of social care in Scotland is completely and utterly wrong, and if this was a debate on social care I would go on down that line.

We have a situation where something regressive is being portrayed as a great benefit to everyone. If people do not pay council tax at all—no benefit. If they are on the lower bands of council tax they get proportionately much less benefit than people on the higher rates of council tax. If we really want to help the worst-off who depend most on council services, the council tax freeze is not a progressive way of doing it. However, if the Government keep saying it, perhaps people will think it is. Sometimes those who do not pay council tax say how wonderful it is in the same breath as complaining about some aspect of council services that is letting them or their families down.

That is why we need to look at a much wider picture of how all these measures interrelate. We can have a philosophical discussion about whether it is better for people to receive effective assistance from the state through the level where we pitch tax allowances, or whether it is better to target people who are in most need. We can have, and have had on a number of occasions, debates about whether tax credits are a good or a bad thing; they were certainly a good thing for many single parents who were able to get back to work as a result.

There are philosophical differences, but in the end, what really matters to people is the money in their pocket, and their income and living standards. If you  are worse off, it is not enough to say “We’ve empowered you. We’ve left you with your own income.” It is nice to feel empowered, but many people are simply being empowered to be worse off than they were before. A lot of people would prefer to have the money in their pocket.

I hope that the Government will review their policies, as they surely want to do. Ministers often tell us that they are reviewing policy all the time and do not need an amendment. We do not want something that goes on in the Treasury with an inconvenient outcome that is not published. Taxpayers generally, and basic rate taxpayers in particular, deserve a proper analysis and the outcome reported, so that future decisions will be well informed and not made on the basis of prejudice. We all have prejudices about what we think are the best measures and levers. The only way to test them out is in reality. We know from our constituents where people are finding it difficult. Study after study has shown that living standards are falling for many people.

The argument is always thrown to us that people who are much better off are taking a bigger hit. I find that slightly strange. In order to balance my newspaper reading, I buy The Sunday Times. I do not normally buy The Times but we buy the Sunday edition. We buy The Guardian during the week and think we should give ourselves a different point of view so that we can educate ourselves. I was interested to see in the business section of The Sunday Times this week that David Smith, the economics editor, said that perhaps low wages had gone too far. As I am sure most Committee members know, David Smith is on the whole supportive of Government policy, but even he was beginning to think that driving down wages and living standards may be harmful to the economy.

In the same edition of The Sunday Times we had the rich list, with the rich getting richer. They are not taking a hit; they are getting richer. In the homes section—I read a lot of The Sunday Times—there were two or three pages describing how property at the higher end of the market was taking off again. Prices are rising and houses that stuck on the market a couple of years ago are now selling more quickly and for higher prices. It appears that some are not suffering in this recession.

Photo of Kwasi Kwarteng Kwasi Kwarteng Conservative, Spelthorne 2:30 pm, 23rd April 2013

Does the hon. Lady want to see house prices fall?

Photo of Sheila Gilmore Sheila Gilmore Labour, Edinburgh East

We could get into a debate about how we provide housing and whether rising house prices have been a boon. For many people on the housing ladder the price they sell and buy at is artificial. As part of a wider housing package, we might want to stabilise house prices rather than see another housing bubble. The point I was making was that people are able to pay over the asking price at higher sums than houses were reaching over the past few years. That suggests they have the income and assets to do so.

Unlike the family of the taxi driver I spoke about, those people do not have to pull in their horns because their income is falling. People whose income is falling not only cannot buy a house; soon some of them will not be able to rent one. Government Members hate us  talking about the bedroom tax, but they should consider someone on £71.70 a week and nearly 60, when the job market is not easy for people of that age, as we have known for many years. My constituent wants a job and has done loads of training courses to get back into work—retraining, keyboard skills, and all the things that people are now supposed to do to get a job—but has not got one yet. She will have to pay £12 of her £71.70 a week towards her rent, which she did not previously have to pay. That is certainly a drop in her income, regardless of whether hon. Members deny it is a tax.

Photo of Sheryll Murray Sheryll Murray Conservative, South East Cornwall

Does the hon. Lady agree that if a person does not get so much back as a benefit because they choose to live in a house with extra bedrooms, they have the opportunity to downsize?

Photo of Sheila Gilmore Sheila Gilmore Labour, Edinburgh East

I am delighted that the hon. Lady has given me the opportunity to talk about the difficulty of downsizing and the ludicrous nature of the word “choice”. I would like to take Government Members to my constituent’s mansion, which has two bedrooms, although one is quite small. She has lived in it for 18 years. She has put effort into her house, as did her husband when he was alive, but he is sadly no longer with her. He died, so she is on her own. People have suggested that she get a lodger to fill the spare room, but as her kitchen comes off her living room that would mean sharing her life with a stranger.

Two weeks ago I checked the availability of one-bedroom social rented houses in my city: 24 houses were advertised—that is all the social landlords in the city. Five of them were sheltered housing for people over 60 or 65. My constituent would not have qualified for those houses even if she wanted sheltered housing, which is usually reserved for the most frail, not for somebody who has not quite turned 60. There were 19 houses left that she could have applied for. The highest number of applications for one of those properties was 950, and the lowest number was 52. They were ordinary council properties—not bad, but not fantastically good. The property with 950 applications was admittedly on Edinburgh’s Royal Mile, where there are still some council properties, although not many; they come up once in a blue moon and are always in high demand. Even a property in my constituency, which I would describe as a pretty average council property—not particularly wonderful, but not in a very bad area—attracted 850 applications. A multi-story flat in what I would describe as a difficult block, which has a lot of problems and a lot of people with social problems—a lot of my constituents would say, “Oh, I wouldn’t go there”—attracted 170 applications. To suggest to people that it is easy for them to downsize is insulting and unreasonable.

One of the amendments suggested by the House of Lords is that if the Government want to introduce the bedroom tax, although it is not a particularly good idea, they could say that if somebody refused a reasonable offer of a downsized property, the bedroom tax would come into play. But that is not what is happening. My constituent might have to wait for two years, two and a half years, or three years, and even then she might not succeed. In my city—perhaps this is not happening in some constituencies—between 3,000 and 3,500 people  every year present as homeless and they have to be housed as well. There is that group as well as the group trying to downsize, so it might not be two or three years; it might be five years. That is not choice.

Other people have been housed in two-bedroom houses by their landlord specifically not by choice, but just because their family is growing up. If we want people to downsize and not to be subsidised, we should at the very least be saying, “Come back when you refuse a reasonable offer, and we will think about it.”

Photo of Stephen Williams Stephen Williams Liberal Democrat, Bristol West

The hon. Lady is giving us good facts from her constituency. Let me give her some from mine, where 21,538 people rent in the private sector, the second highest proportion in the country—ironically, I think the highest is in the constituency of the Government Whip—and 5,209 rent from the local authority. The rules that the hon. Lady described pertained throughout the entirety of the previous Labour Government. At the most recent election, I do not recall any of the three Labour MPs in Bristol, or the candidate who stood against me, campaigning against a bedroom tax. Did the hon. Lady?

Photo of David Crausby David Crausby Labour, Bolton North East

Order. I gave the hon. Lady some licence as a result of the interventions, but I think she should struggle back to clause 2 and amendments 7 and 8.

Photo of Sheila Gilmore Sheila Gilmore Labour, Edinburgh East

There is genuinely a big difference between people in the private rented sector and those in the social rented sector, not least because we are talking about people’s permanent homes. In the private rented sector, rents are already extremely high. I would like to see far less money going out on housing benefit in the private rented sector, because that is where we got into problems with housing benefit, rather than forcing people to take a substantial cut in their income with no realistic way—

Photo of Sheila Gilmore Sheila Gilmore Labour, Edinburgh East

I find this incredibly offensive. Someone who has been living for 18 years in a home they have put effort into, in their own community, will suddenly be told that they have to find extra money or make a choice that does not exist. I have demonstrated that it does not exist. Although it is pretty hard all round to get accommodation in Edinburgh, the one place a one-bedroom property might exist is in the private rented sector. In that case, the amount of housing benefit paid out in respect of that person will be a lot higher, but her security will have disappeared. I spoke recently to an 82-year-old constituent in the private rented sector who has just had a notice to quit from a landlord who wants to sell, so I know what insecurity in the private rented sector looks like. If the hon. Member for South East Cornwall wants to come to my constituency and tell my constituents that it is their choice, she is welcome to do so and I will be happy to welcome her.

Photo of Stephen Doughty Stephen Doughty Labour, Cardiff South and Penarth

I wholeheartedly associate myself with my hon. Friend’s comments and the passion with which she  delivered them. We have also heard about the squeeze on living standards for people on middle incomes. I met a constituent the other week who, like me, wanted to see the benefits bill come down. She had been in a reasonably well-paid job in the construction industry but lost it because of the Government’s complete failure on infrastructure, and she is now struggling to stay in her home on benefits. She had applied for 100 jobs but had not been able to find a single one; she certainly would not recognise the figures that the Government are constantly giving about the million private sector jobs that have been created. Does my hon. Friend agree that we are seeing a squeeze not only at the bottom, on some of the poorest in society, but on people on middle incomes who are doing the right thing and trying to get by, but failing because of the Government’s economic policies?

Photo of Sheila Gilmore Sheila Gilmore Labour, Edinburgh East

My hon. Friend is right to highlight that, because many people have taken reduced hours and reduced wages to stay in work and they are also experiencing severe difficulties with living standards. Because most of my audience on the Government Benches did not hear this last week, I will describe again the sorts of jobs that are available in Edinburgh. One of my constituents wanted to work a few extra hours to pay his bedroom tax. He did not choose his two-bedroom home, but that is what he has; it is in a high-rise block. He works 15 hours a week for a supermarket. He asked for more hours but they said no. That may have been because 15 hours a week on minimum wage is below national insurance level and it would be easier to employ two people than give him more hours. If he were offered more hours, I suspect somebody else would get fewer.

I then thought about other jobs my constituent might be able to get in the area. I went on to the Government’s new universal job match website. I do not know whether anybody else here has looked at it. I typed in “Edinburgh” and “shop assistant”, as that is what he is. I got quite excited. I was going to phone him and tell him it claimed to have 100 jobs, although it was only 76 as the last page only had one on it. There were 76 jobs he could apply for—fantastic. Fifty-seven of those 76 jobs under the heading of shop assistant, most not in Edinburgh but in the surrounding area, were for self-employed catalogue distributors and sellers. If those are the kind of private sector jobs that have been created, we have to ask some serious questions. There was a warning that the person would be self-employed, would have to pay for transport and £250 up front to start work. That is the reality that a lot of people face.

My constituency—and city—is not one with the highest unemployment in the country. It is not an unemployment blackspot. In Scottish terms it is seen, after Aberdeen, as one of the more prosperous parts. Yet even there the jobs simply are not available. If the jobs that are there are like the ones I described they are not going to give someone such as my constituent the living wage that he needs.

If we are not boosting the economy, if we are not taking measures to stimulate the economy, it is not surprising that growth is stagnating and the deficit not reducing. I can see lots of activity across the room. I suspect hon. Members are all looking up universal job match to prove me wrong. That would be interesting.  When I told my hon. Friend the Member for Makerfield (Yvonne Fovargue) about it, she looked up her area and discovered to her horror that it was exactly the same. She thought I might have been slightly exaggerating.

If we want to know what is happening and to look at what effect the rise in the tax allowance has compared to other measures that have been and are being taken, we need a review. I strongly urge hon. Members to agree to the amendment and to have the review. As I said earlier, if the Government are right and we are wrong, they will be only too pleased to tell us so.

Photo of Fiona O'Donnell Fiona O'Donnell Labour, East Lothian 2:45 pm, 23rd April 2013

It is a pleasure to serve again under your chairmanship, Mr Crausby, and to follow my hon. Friend the Member for Edinburgh East. During the break, I thought of little else but what she might offer in her contribution and she has not disappointed. I rise to speak in favour of the two amendments tabled by my hon. Friends to review and to assess the impact of two specific proposals in the Budget.

This is the first time I have served on a Finance Bill Committee. The Whip for the Treasury team was surprised by my enthusiasm, as I was keen to serve. However, I am disappointed by the offerings of the Chancellor in his Budget. There is not a great deal to discuss. Last year’s might have been more interesting for Opposition Members to debate. It was like an extravagant banquet that gave quite a few people tummy aches. This time we are getting more of a packed lunch of a Budget. If anyone were to blind-taste this Budget they would not believe it was in response to the difficult times the country faces.

I want to talk about the granny tax—what some Members call the age-related allowance; I hope that keeps Government Members happy. That is how it has been colloquially and affectionately called by many. That again shows how out of touch Government Members are.

Sheila Gilmore rose—

Kwasi Kwarteng rose—

Photo of Fiona O'Donnell Fiona O'Donnell Labour, East Lothian

I will first give way to my hon. Friend, but then I will, with great glee, give way to the hon. Gentleman.

Photo of Sheila Gilmore Sheila Gilmore Labour, Edinburgh East

I think the first place I saw the term “granny tax” was on the front page of the Daily Telegraph the day after last year’s Budget.

Photo of Fiona O'Donnell Fiona O'Donnell Labour, East Lothian

We are getting more and more interesting revelations about my hon. Friend’s reading habits.

Photo of Kwasi Kwarteng Kwasi Kwarteng Conservative, Spelthorne

We have sat a long time and what we have heard from the Opposition Benches has not been a rigorous scrutiny of the Bill; it has been a litany of complaints about Government measures to reduce the deficit and to reduce spending. We have not heard one constructive idea. This is not constructive opposition, by any stretch of the imagination, and it is terrifying that the people on the seats opposite seem to think that they are going to waltz into Government. The country does not find them credible; it is not going to turn to this rather childish and constant carping at serious attempts to reduce the deficit.

Photo of Fiona O'Donnell Fiona O'Donnell Labour, East Lothian

In that case, Mr Crausby, I very much hope that one Government Member will make the effort, stand up and give us a constructive and well thought out defence of the Government and their proposals in this Finance Bill. I am sure the country’s heart is bleeding that the hon. Gentleman has had to sit for hours to suffer the slings and arrows of outrageous claims from the Opposition. Welcome to Government. If he wants to swap sides, that is fine. I am sure, Mr Crausby, that you would be the first person to tell me, if I were to launch into a wide-ranging scrutiny of this Bill, that the purpose is to speak specifically about these two amendments. I will now do so.

I want to discuss the impact of the granny tax, as it was affectionately named in the pages of the Telegraph. Government is all about making choices, and we know that the Government find these choices tough—they are constantly telling us just how tough they are. The fact is that they faced a choice; whether or not to give a tax break to the wealthiest members of society. Let us remember that we are talking about pensioners on modest incomes. We are not talking about millionaires in this case. The Government have made a choice and they need to defend that. We are seeking to assess the impact of that and what the impact will be of taking away £322 a year from those people reaching retirement age on 6 April. Government Members have defended their record and the choices they have made, talking about the fact that the richest 10% of society are paying more under this Government. However, when the Government take away £322 a year from someone on a modest income who is retired, it has a far greater impact than taking away similar amounts from those who are in work, below retirement age and with very healthy incomes.

Photo of Stephen Williams Stephen Williams Liberal Democrat, Bristol West

I do not know whether the hon. Lady was here or listening this morning when I challenged her Front-Bench colleague about that figure. If someone has lost £322 a year—if more tax has been paid to the tune of £322—we can times it by five to get the gross income. That is £1,600. The allowance cannot have been changed by inflation. That bears no reality whatever to the freezing of the age-related allowance. If she is going to cite figures, she ought to look into them in more depth.

Photo of Fiona O'Donnell Fiona O'Donnell Labour, East Lothian

I would say in response to the hon. Gentleman that he has already had a perfectly satisfactory explanation. Perhaps he would like to offer me an alternative amount. How much is this going to take away? Does he wish to intervene and give me an accurate figure?

Photo of Stephen Williams Stephen Williams Liberal Democrat, Bristol West

What has not happened is the uprating of the allowance by the rate of inflation, which is about 3% at the moment. If the allowance had gone up by inflation, that is the amount of tax-free income that someone would have received. It is not £1,600.

Photo of Fiona O'Donnell Fiona O'Donnell Labour, East Lothian

The Government claim that they are doing this to save money and to reduce the deficit. I am still waiting for the hon. Gentleman to tell me how much the measure will take away from people’s disposable income. The Opposition have put forward the excellent idea that we should assess that and make the figures  available in the House of Commons. I just do not understand the hon. Gentleman’s logic. Given that retired people are on modest incomes, we know that they would spend that money in their local communities, which would help struggling businesses.

The second amendment asks the Government to take a broader look at the overall impact of the changes that they have made to benefits and tax since they came to power. The Liberals seem to be fixated on the much trumpeted reduction of the level at which income tax kicks in, probably because it is the only thing they really feel they have got out of the coalition so far. We need to look, in much broader terms, at whether people are better or worse off. That is why it would be useful, if the aim of at least one member of the coalition is to improve the lot of those who are in work and on low pay, to see whether those people are better off. What problem do the Government have with publishing those figures and having an assessment so that we can see whether it is working? I suspect it is that, if we look more broadly at what has happened in other areas, we will see that money has been taken away from hard-working families.

That fact has been borne out recently. The hon. Member for Nuneaton spoke about the impact of freezing council tax, and said it would benefit those on low pay or unfixed incomes. But my hon. Friend the Member for Edinburgh East has already pointed out the dangers of going down that road. We have seen the danger in Scotland, where services for vulnerable people have been cut as council budgets have dropped in real terms.

Photo of Marcus Jones Marcus Jones Conservative, Nuneaton

The hon. Lady makes a very interesting observation about council tax. I can tell her that most of my constituents are extremely happy that council tax has been frozen for the past three years. Is she advocating that we go back to the custom and practice of the previous Labour Administration and double council tax, as they did in government?

Photo of Fiona O'Donnell Fiona O'Donnell Labour, East Lothian

At least then there was a real degree of localism and local democracy. Voters had the option to vote out the administration in their area. This Government, by centralising control, are taking away democratic choice at a local level. I wonder what the hon. Gentleman’s constituents would say about the report from the Joseph Rowntree Foundation, which shows that almost 2.5 million families on low incomes will be paying £138 more in income tax?

Photo of John Cryer John Cryer Labour, Leyton and Wanstead

Like my hon. Friend, I wonder why nobody on the Government Benches is prepared to stand up and make a speech, rather than an intervention, to set out a critique of why there should not be a review. I know what happens in Government parties: the Whip tells hon. Members to just stay there and shut up. When we were in government, I took no notice of the Whip and spoke in every Committee I was on. To be honest, I did not take a lot of notice of the Whips in general when Labour was in government, as some hon. Members know. Why do Government Members not show a bit of backbone, stand up and defend the Government’s position?

Photo of Fiona O'Donnell Fiona O'Donnell Labour, East Lothian

It is too much of a stretch of the imagination to believe that this is just a curious incident. I sat though the debates on the Floor of the House, and the Benches were empty. I managed to rouse one hon. Member from not a sedentary position, but a prone position. At the beginning of this sitting, Government Members were so noisy that I thought the Whips had fed them E numbers or something, but even that seems to have abated.

Photo of Stephen Williams Stephen Williams Liberal Democrat, Bristol West 3:00 pm, 23rd April 2013

This is a triangular intervention because I will try to answer the point made by the hon. Member for Leyton and Wanstead. The probable reason why no one on these Benches wishes to say why the Government should not do a review to help out the Labour party is that the Government publish reviews all the time. They publish a Red Book for the Budget and a Green Book for the autumn statement. The Office for Budget Responsibility and the Office for National Statistics do reviews. All of those reviews are on the record.

Since the general election the Labour party has pocketed £13 million from taxpayers of Short money to help with policy development and analysis while in Opposition. Perhaps they could spend some of that money and publish some reviews themselves.

Photo of Fiona O'Donnell Fiona O'Donnell Labour, East Lothian

That is quite incredible; I am genuinely stumped by that intervention. It is not about helping the Labour party; it is about reviewing the impact on people across all the Government’s policies of the changes made. That is not just for the benefit of Opposition parties, it is for the benefit of many campaigning groups across the country. That was not a helpful response. Perhaps the hon. Gentleman will show that there is not a Whip keeping them on their seats just grumbling, by making a positive contribution to the debate. We can then have a more reasoned discussion.

We are talking about the total impact. One measure in particular is the freeze on child benefit. I remember, when the Tory Government fell in 1997 and I was struggling with a family of four children and not in work, that the biggest change came when child benefit was increased and I could spend it directly on my family.

Returning to the subject of age-related tax relief, Age Concern UK is now increasingly trying to work with food banks across the UK, offering to provide them with funding. That is not just about the poorest pensioners; it is again across society. Food poverty and insecurity are at times in places we would not expect. That is certainly the case for a family with four children I visited in my constituency. I spend some time in the company of the hon. Member for South East Cornwall and that is always pleasant, but I was astonished by her remark about people choosing to live in properties that are bigger than they require. The family I met had been on the housing waiting list—

Photo of Fiona O'Donnell Fiona O'Donnell Labour, East Lothian

I will give way, but I would like the hon. Lady first to listen to this example of what is actually happening to families. The family has four  children and had been living in an over-crowded house for more than eight years. That might be the fault of the SNP Administration in Scotland. The first house they were offered was a four-bedroom property. I do not think it is unreasonable that after eight years of being over-crowded they chose to take that property.

The husband, the father of the four children, has just found a job. I have concerns because there is a self-employed part to it and he has had to fork out money to buy equipment to clean windows. I hope he does make a living that makes his family better off. What they had not expected was to be hit by the bedroom tax. Money is going to be taken away from a family that has already seen child benefit frozen in a most difficult situation. They had to turn to a local food bank to put food on the table for the family.

Photo of Sheryll Murray Sheryll Murray Conservative, South East Cornwall

I am grateful to the hon. Lady for giving way. Mr Crausby, through you I would like to ensure that there is no misunderstanding. What I said was that people had a choice to downsize if they so wished. If I found that I could not afford to stay in my three-bedroom house, I would look to downsize. That is what I said. I did not say that they had to stay there and pay the additional money.

I understand the hon. Lady’s specific point about one constituent, but people have the choice to downsize if they are living in a house that costs more than they can budget for. The same principle applies in the private and the public sectors. There is no difference. It is a choice we all have.

Photo of Fiona O'Donnell Fiona O'Donnell Labour, East Lothian

It is not a choice that we all have, and that is exactly the point. It puts an end to any idea that we are all in this together. What choice have the family I mentioned got now that they have been moved? There is no smaller council house available for them to move into, so the choice that the hon. Lady suggests they have is between continuing to live in an overcrowded property, suffering the impact of the strain that was putting on their family’s life, and taking the four-bedroom house—the only route out of overcrowding that they were offered—which they will eventually not be over-occupying. That is not a choice.

There is no choice for that family, because there is nothing available in the social rented sector for them to move into. The hon. Lady will say that the private rented sector is an option, but educationalists in East Lothian to whom I have spoken say that moving children to a different school is one of the most disruptive things that one can do, and it causes problems for teachers who have to support children through that process.

Photo of Ian Mearns Ian Mearns Labour, Gateshead

I really think that the hon. Member for South East Cornwall needs a reality check when it comes to life on the ground for families in areas such as the north-east of England. In my own local authority area, between the registered social landlords and the local authority housing stock, 4,000 families are affected by the spare room subsidy, or the bedroom tax, as we prefer to call it. What choice do families in Gateshead have? They could go to the private rented sector, where, on average, rents for similar or even smaller properties can be 25% to 40% higher. Where is the gain for the Treasury in moving families from a sector with lower  rents into one with higher rents to circumvent the bedroom tax? In addition, every other housing authority in the area—in Tyne and Wear, in Northumberland and in Durham—is in exactly the same boat. Families would have to get on their bikes and go an extremely long distance, possibly to the south-west of England, to exert the choice that the hon. Lady has talked about.

Photo of Fiona O'Donnell Fiona O'Donnell Labour, East Lothian

The Government have not simply made a bad choice; this is actually a bad policy, because we may find that it does not save money in the way in which the Government had hoped.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

I thank my hon. Friend for the powerful case she is making for the review. I also want to express my concern about the attitude that people have a choice about whether to pay the bedroom tax or spare room subsidy. I am pleased that my hon. Friend mentioned the instability that the policy will cause to children, because one of the most worrying cases that I have encountered was that of constituents who have three children: a little boy aged three, a boy aged 13 and a little girl aged eight. They live in a three-bedroom property, and they have been told that the 13-year-old boy has to share with his three-year-old brother until he is at least 14, so they have to find extra money for one year to pay the bedroom tax. [ Interruption.] The problem is not that the children will have to share, but that the family will have to pay the bedroom tax. The children are in local schools, and if the family have to move, they will have to uproot the children and the three-year-old will probably have to go to a different school. Families cannot manage to send their children to three different schools across the city. The policy is uprooting a family who are in a secure home and whose children are in secure education, and that is just one family. The long-term damage to ordinary families is deeply worrying, and they do not have a choice because they do not have the money to pay the bedroom tax.

Photo of Fiona O'Donnell Fiona O'Donnell Labour, East Lothian

I thank my hon. Friend for her contribution. I will give way to the hon. Member for Braintree.

Photo of Brooks Newmark Brooks Newmark Conservative, Braintree

Before I respond to the hon. Lady—I want to have a slightly more mature debate about this—I want to acknowledge that there is a housing shortage. About 20 years ago when I did not have a job, I lived on Camberwell New Road. I had five children under the age of 12 at that time, and I had a two-bedroom house. I had five children in two sets of bunk beds. Yes, I am wealthier now and I have been successful, but that is a choice that I made; I chose to have a number of children and we had to make ends meet the best we could. My children were not unhappy in that situation; they were not damaged by it at all and they were four boys and one girl.

I want to get on to what the hon. Lady said and acknowledge that there is a housing shortage, but I would point out that under the Labour party, the amount of social housing built was the lowest in almost 50 or 60 years, and that is what has created the problem today. I would like the hon. Lady at least to acknowledge that. I admit that there is a housing shortage, but I want  her at least to acknowledge that Labour presided over one of the lowest levels of social housing building on record.

The second point that I want the hon. Lady to accept is the principle. Does the Labour party admit that people who are on benefits should behave like people in the private sector; that if housing is available for them to downsize to, then they should downsize? Thirdly, if they cannot downsize, should they not take in a lodger? That is what people in the private sector have to do.

Photo of David Crausby David Crausby Labour, Bolton North East

Order. First, interventions should be short; they are not speeches. Secondly, I have tried to give a bit of licence as far as the so-called bedroom tax is concerned—I cannot remember the other description—but I am definitely clinging to amendment 8, which will review the overall impact of the Government’s Budget measures on the living standards of basic rate taxpayers. I do not believe that the bedroom tax is linked to those Budget measures; it is part of the Social Security Act. While I have been happy for this debate to expand a little, we should pull ourselves back to clause 2, which is about personal allowances for those born after 5 April, and the two amendments.

Photo of Fiona O'Donnell Fiona O'Donnell Labour, East Lothian

Thank you very much for your wise words, Mr Crausby. If Government Members want to make interventions that are so lengthy that they almost constitute speeches, perhaps they should make individual contributions, because the hon. Member for Braintree made many points.

I am talking about people who are on the basic rate of income tax, which would hopefully be the case of this family, if they achieve a certain level of income. I was not aware that income tax was a barrier to them finding employment, as was suggested by the hon. Member for Penrith and The Border.

I absolutely do not think that Labour Members have a monopoly on compassion and understanding. However, there is an attitude from Government Members who have experienced poverty and learned from it that is twisted, in a Thatcherite way, into saying, “Well, if I could get myself out of it, why can’t they?” That shows a complete misunderstanding and a lack of acknowledgement of what poverty can do to people—it can grind them down. Many of us will have struggled on lower incomes with large families, but do we want future generations to face the same difficulties just because it was good enough for us? I certainly want my children to have a better life and a better story than I did, and my grandchildren even more so.

Let me move on to the amendment. The hon. Member for Penrith and The Border spoke about income tax as being a barrier to employment. In general terms, people want to know that they will be better off in employment than if they are living on benefits. When we look at the overall impact of all the changes the Government have made, and put that together with the increase in the cost of living—whether that is putting fuel in a car or food on the table, or having any kind of leisure activities—the cost of living has gone up. The OBR has made it clear that people will be worse off at the end of five years of a Conservative and Lib Dem Government than they were at the beginning.

Photo of John Cryer John Cryer Labour, Leyton and Wanstead 3:15 pm, 23rd April 2013

Is not the biggest barrier to employment a lack of jobs?

Photo of Fiona O'Donnell Fiona O'Donnell Labour, East Lothian

That is the case in some areas. My hon. Friend the Member for Edinburgh East described what happens when people take the time and effort to dig into what is on offer. I am not opposed to zero-hours contracts outright. One of my first jobs involved a zero-hours contract, and it suited me to be able to say when I would and would not work, but I was not the sole wage earner in the household, so my children were not dependent on me bringing home food for them to eat. A whole range of measures is having an impact.

Labour Members are simply asking that we properly review the impact of the measure. I make an appeal to Liberal Democrat members of the Committee. They have given up so much to achieve the policy of raising the threshold for tax. If they really want to be able to tell their constituents that that was worth the increase in tuition fees and all the others things, they need a realistic assessment of its impact. They need to know whether it is improving people’s standard of living or whether, when we look across the piece, the Government are hurting hard-working families.

Photo of Steven Baker Steven Baker Conservative, Wycombe

I rise to support clause 2 and to oppose amendments 7 and 8. Clause 2 represents practical action to lower taxes on low-paid working people. Lifting low-paid working people out of tax is a far more practical, far simpler and far more effective idea than introducing a 10p rate, as the other lot did, at a lower income level. I regret that amendment 9 was not been selected for debate, although that would not represent practical action, because it would simply ask the Conservative Chancellor of the Exchequer to do the Opposition’s thinking for them.

Photo of Ian Mearns Ian Mearns Labour, Gateshead

The hon. Gentleman’s point that raising the tax threshold is a real boon to people in low-paid jobs is correct as long as they are earning enough to reach the threshold in the first place. Part of the problem we have with the differential in how the economy works in different parts of the country is that far too many people in far too many areas who are working in part-time employment, but would rather be in full-time employment, do not earn enough to reach the threshold to pay tax.

Photo of Steven Baker Steven Baker Conservative, Wycombe

The hon. Gentleman makes a reasonable point. I will not be drawn into an argument that I have previously advanced about the harmful redistributive effects of monetary policy, although if he wants to discuss that, I will gladly do so on another occasion. I do not doubt that there are other measures that ought to be taken, but clause 2 represents a good provision that I will gladly support it. Do the Opposition welcome the measure, because I do not think that any of their Members has said so? Will they vote against clause 2 stand part? I doubt it. Would they reduce the personal allowance? Where do they stand on this matter? I hope that Opposition Members will support clause 2.

I am conscious that the Budget included a good, comprehensive and informative distributional analysis. To burden primary legislation with calls for particular  reviews and documents is a diversion. Anybody who goes to the Vote Office can see for themselves that we are already festooned with documents. There is undoubtedly other work to be done on how Government policy affects various people and groups on various incomes, but the amendments are not the way to do it. The way to do that work is to hold the Government to account through Select Committees and through other mechanisms to ensure that they are aware of the impact of their policies. I do not doubt for a minute that the Government know very well what they are doing: they are seeking to lower taxes on the low-paid, which is an admirable and honourable thing to do.

Photo of John Cryer John Cryer Labour, Leyton and Wanstead

It is a pleasure to serve under your chairmanship, Mr Crausby, and I will take notice of your admonitions that we should keep in order. Failing that, I will get away with what I can—[Laughter.] I am sorry; I did not actually mean that.

Photo of John Cryer John Cryer Labour, Leyton and Wanstead

When we were in government and the Conservatives were in opposition, I remember amendments being tabled in Committee after Committee calling for reviews, reports and submissions. Such amendments would call specifically for reviews to be established under primary legislation. I am sure that there are some Conservative Members who will admit to tabling such amendments. I do not know about the Liberal Democrats but, from what I remember, they were even worse at it. They were always banging down amendments calling for reviews; at one point, they actually asked for a review of all the reviews that were going on.

My hon. Friend the Member for Gateshead—for the benefit of the hon. Member for Ipswich, Gateshead is a town in the north-east of England with a manufacturing background; it is part of that large blob above Watford gap of which he is vaguely aware—asked what all the suffering was for. Well, not very much, as far as I can see. The main purpose—apart from all the other ones—that springs to mind is the loss of our triple A credit rating from not just one but two of the agencies.

For years, the Chancellor and his Treasury Ministers told us how important that triple A rating was. We were told it was the thing that mattered above all else, because it meant that interest rates would remain low and we would retain stability and credibility on the international markets. Now, however, it has gone, and the Chancellor is telling us that it did not matter anyway. Either he was wrong before or he is wrong now—or at least he is being slightly misleading.

The purpose behind amendment 7 is clear. People who turned 65 on or after 6 April will not receive any age-related allowances—they will go. The age-related allowance will gradually wither on the vine for the over-65s, and then for the over-75s as well. To back that up, the National Pensioners Convention, with which I deal extensively, states in its briefing on the March 2013 Budget:

“the Chancellor has stuck to his plans to freeze the age related personal tax allowances for someone aged 65 to 74…and for someone aged 75…until they align with the ordinary personal allowance. On current trends, this is likely to be around 2015.Therefater, the allowances will rise in line with CPI.”

I will be grateful if a Government Member will confirm that the allowances will be in line by 2015 and that the overall loss to pensioners will be in the region of £3 billion. We are talking about a £3 billion raid on pensions over the next two years.

Photo of Kwasi Kwarteng Kwasi Kwarteng Conservative, Spelthorne

It is especially ironic that the hon. Gentleman is talking about a raid on pensions, given that that was the first thing that the Labour Government did in 1997. The then Chancellor of the Exchequer raided pensions to the tune of £5 billion, so Labour did more to damage the pension industry in this country than any other Government before or since.

Photo of John Cryer John Cryer Labour, Leyton and Wanstead

A lot that was done to damage the pension industry occurred during the deregulation and liberalisation of the 1980s and 1990s. A lot of occupational pensions are struggling to remain in surplus today because of all the lengthy pensions holidays that were taken during that period. As somebody who worked in the financial industry in the 1980s, I saw that starting to happen, and now pensioners and future pensioners are paying the price.

Photo of Ian Mearns Ian Mearns Labour, Gateshead

My hon. Friend makes a really important point. In fact, private company pension funds were not the only ones encouraged to take pension holidays, because Mrs Thatcher’s Government regularly encouraged local authority pension funds to take them during the 1980s, which has left the funds in a much worse position than would otherwise have been the case.

Photo of David Crausby David Crausby Labour, Bolton North East

Order. Hon. Members are now dealing with pensions legislation in the 1980s, rather than the two amendments.

Photo of John Cryer John Cryer Labour, Leyton and Wanstead

I am sorry, Mr Crausby. I was about to move to the introduction of age-related allowances by Winston Churchill, and then go back to the 18th century, but I will leave that to one side.

The hon. Member for Spelthorne said that there are many more pensioners around today, yet pensioners in Britain have a life expectancy that, depending on how it is judged, is between the fourth and seventh worst among the 23 most developed economies. Pensioners are therefore not doing all that well in Britain today, and there is a lot of evidence that they tend to become poorer once they get over 80 because of their fixed incomes. If we follow the logic of his argument that there are many more pensioners around and therefore we have to unify the age-related allowances with the normal personal tax allowance, why not introduce an age-related allowance for the over-80s, the over-85s or the over-90s? The Government, however, are not doing that; they are just abolishing all the age-related allowances with what we call the granny tax, a term to which they take great offence. Each week and almost each day, many of us are seeing, as a result of such policies, an explosion of poverty and unemployment.

Photo of Kwasi Kwarteng Kwasi Kwarteng Conservative, Spelthorne

The hon. Gentleman is making a number of good points and relating the debate to the evolution of pension provision, which is very important. He should appreciate that when the old-age pension was introduced in 1909—104 years ago—the age at  which one received a pension was 70 years, and life expectancy at that point was another 18 months. The 1909 old-age pension was essentially a pat on the back—a well done—and the person was expected to live another 18 months. As he said, we have poor OECD figures on life expectancy, but he must appreciate that life expectancy is substantially longer than it was in 1909—perhaps 20 years longer—and that this is a big problem. For the Labour party to carp at the Government’s measures and not to recognise the problem is irresponsible.

Photo of John Cryer John Cryer Labour, Leyton and Wanstead

I know exactly what point the hon. Gentleman is making, but the state retirement age is to rise over the next few years. He seemed to be making the point that because of the growing number of pensioners and growing life expectancy, which is obviously to be welcomed, age-related allowances cannot be maintained. If it is a numbers problem, however, what about an age-related allowance for the over-80s or the over-85s? His argument does not infer that we simply have to abolish all the age-related allowances and unify things on the basis of the personal tax allowance. That is something of a misnomer.

Photo of Ian Mearns Ian Mearns Labour, Gateshead

We also need to consider the point that life expectancy in the poorest communities is substantially shorter than that in wealthier communities. Even within my constituency, there is a seven or eight-year differential between some of the poorest and wealthiest wards, and the greatest differential between communities in my borough is 13 years. What actually happens, in real terms, is that the poorest communities pay more for a shorter pension, because the people die younger.

Photo of John Cryer John Cryer Labour, Leyton and Wanstead

That is true, and it applies in my constituency and the area around it. If one goes east on the Jubilee line, with which many of us are familiar, life expectancy reduces at each stop travelling out to the east end, which has always been an area with fairly high levels of poverty. I represent four of the wards that are among the most deprived in London, and therefore in Britain. Additionally, as my hon. Friend the Member for Newcastle upon Tyne North pointed out earlier, the financial position is not the only thing, because while pensioners’ living standards and pensions are being squeezed, the squeeze on local authorities is leading to cuts to the very services that are perhaps needed now more than ever over the past 20 or 30 years. Day centres are going, for example, and money spent on care is disappearing.

With reference to the National Pensioners Convention, for a number of years I worked with someone called Jack Jones—I see, for one or two Members on the Government Benches, that that was like an electric shock. It was almost as if I had said that I worked with the devil.

Jack Jones was leader of the National Pensioners Convention for probably 30 years. I imagine that if I had told him before he died—he died five or six years ago—that pensioners would face this position, he would have found that extremely difficult to believe. He had been a campaigner for all those years not just for former  members of the Transport and General Workers Union, but pensioners nationally. Remember: there are more than 13 million pensioners in Britain today. That is an awfully powerful lobby and I suspect that the Government will feel some backlash from those individuals.

We also have to remember that living standards are being squeezed generally, and a lot has been made about inequality and insecurity. At the moment, for people in work, insecurity is mounting and mounting. I will give a few examples: the Enterprise and Regulatory Reform Bill makes it easier to sack people. Protected conversations are being introduced, and they have never been on the statute book before. The Growth and Infrastructure Bill introduces this scheme of rights for shares— there are some things that the Government do with which I disagree but I can see their rationale, but rights for shares is just barking mad; it is a loony scheme—and the consultation time on redundancies is being reduced from 90 days to 45.

Do Government Members think for one minute that any of those measures will increase people’s sense of security and confidence when it comes to spending money, which is what we need? They will not; they will make them feel more insecure, so they will feel far less certain about spending money on the durable consumer goods that we need them to buy. That is to say nothing about the increase in agency working, zero-hours contracts, temporary jobs, part-time jobs and the sorts of tax dodges that the payroll companies are allowed to get up to that lead to more and more people living under a bogus self-employed status. They are not self-employed; they are employed, but they are put under bogus self-employment by payroll companies so that they can be sacked at a drop of a hat. That increases the sense of insecurity.

I would like to finish by going back to the quotation from the Prime Minister that I used earlier. In 2009, he said that

“more unequal countries do worse according to every quality of life indicator.”

I notice that that was from the Hugo Young memorial lecture in 2009. What the Prime Minister was doing delivering that lecture I have absolutely no idea—perhaps somebody could enlighten me? I could not stand Hugo Young. I used to hate virtually everything that he wrote; he wanted to sign up to everything that flew out of Brussels, so I cannot imagine that the Prime Minister was a great fan either.

Anyway, when the Prime Minister gave the Hugo Young memorial lecture, he made it clear how dangerous inequality is. As he said, every quality of life indicator is worse in unequal societies. What we see now is a much more unequal and insecure society and that will get worse over the next three years.

Photo of Brooks Newmark Brooks Newmark Conservative, Braintree 3:30 pm, 23rd April 2013

I have been inspired to speak to the amendments. I was not expecting to—I had hoped not to—but we should stick to what this clause is about: personal allowances and who benefits from them. For Hansard I thought it would be worth while to take a couple of minutes to review what is going on, with the real benefits of personal allowances to ordinary people, notwithstanding some of the legitimate points made by the Opposition.

The changes to personal allowances mean that 2.7 million people have been taken out of tax altogether. The other statistic worth reflecting on is that 24.5 million have benefited from the increase in the personal allowance. That is a policy that we in the Conservative party advocated for a number of years and, in coalition with the Liberal Democrats, we finally had an opportunity to implement it. That policy was important because we want to support hard-working people.

In cash terms, the personal allowance has increased from £6,475 under the previous Government in 2010-11 to £10,000 in 2014-15, a magic number we all aspired to. Twenty million basic rate taxpayers will benefit by £500 in real terms and £700 in cash terms. Those are important statistics that I would like the Opposition at least to acknowledge and reflect on.

I support clause 2 because it supports people who are working hard and struggling. People on low pay are finding it very tough; we should all acknowledge that. We have to remember that, as a result simply of clause 2, 1.1 million people will be taken out of tax altogether. That has to be good for society, and the Government should be congratulated on that. Touching on amendments 7 and 8—

Photo of Andy McDonald Andy McDonald Labour, Middlesbrough

I do not doubt for a second the arithmetic the hon. Gentleman laid out before us. Does he not accept it is a matter of whether someone is better off? If the Government are giving with one hand but taking away with the other and making them worse off, is that not the real story?

Photo of Brooks Newmark Brooks Newmark Conservative, Braintree

I am pointing out what the Government are doing and what the benefits have been to individuals, particularly on low pay. That is what is important. We went off on a tangent with a digression on the spare room subsidy. I do not think that is directly relevant but it has an impact. To reiterate the point I made to the hon. Member for East Lothian, we all have to reflect on the fact that Labour had 13 years to build extra social housing. That extra housing capacity was not built, which has left us with today’s problem.

I acknowledge that there is a shortage of housing and it is difficult for people to downsize in particular areas of the country. However, I want the Opposition to acknowledge the principle that those people who are not on benefits, who live in the private sector, either have to downsize if they can or they take in a lodger. Those are the choices in the private sector. I do not think that people on benefits should be treated as special cases. They have to live in the real world in the same way as people in the private sector.

Photo of Brooks Newmark Brooks Newmark Conservative, Braintree

Just a second. The Opposition need to show a little bit of intellectual flexibility and honesty about what can and cannot be done.

Photo of Ian Mearns Ian Mearns Labour, Gateshead

I agree with the hon. Gentleman: for a range of reasons, the previous Government did not build as many social occupation houses as they should have, and I make no excuse for that. However, they did bring a lot of existing stock up to a modern standard  through huge investment in what was called the decent homes standard. In my local authority area, 22,000 houses were improved at a cost of almost £200 million.

Photo of Brooks Newmark Brooks Newmark Conservative, Braintree

I acknowledge that. I am focusing on the point the Opposition made about the housing shortage. There were 13 years for the Labour Government to reinvigorate social housing. They did not do that by building extra housing.

Photo of Paul Uppal Paul Uppal Conservative, Wolverhampton South West

The argument about social housing has just been rehearsed, but one point that is often overlooked when we look at the housing benefit bill over the past 13 years—I have some interest in the matter because I used to work in the property profession—is that a common practice in times of comparative largesse was for landlords and letting agents to conduct negotiations that amounted almost to a false bidding process, which pushed up housing benefit. We are now reaping what we sowed from 13 years of negligence in the management of housing benefit.

Photo of Brooks Newmark Brooks Newmark Conservative, Braintree

As always, that was an excellent point from my hon. Friend.

Photo of Sheila Gilmore Sheila Gilmore Labour, Edinburgh East

I understand that the hon. Gentleman is concerned about the shortage of housing. Leaving aside the question of who caused that shortage, there are two things to consider. First, why will all the Government’s proposed affordable housing be set at 80% of market value, which will not be affordable and will simply increase the housing benefit bill? Secondly, no matter who caused the shortage, if the houses do not currently exist, rather than suddenly applying the proposals to everyone, would it not have been better to have accepted the House of Lords amendment that stated that people would pay only if they did not take up a reasonable offer?

Photo of Brooks Newmark Brooks Newmark Conservative, Braintree

I simply repeat the point I made earlier that there must be a little flexibility in approach, so if one cannot downsize, one should at least consider taking in a lodger. Those are the choices faced by people in the private sector, and I suggest that the Opposition at least begin to think like people in the private sector do. Traditionally, if people have not been able to downsize, they have taken in a lodger.

Photo of Rory Stewart Rory Stewart Conservative, Penrith and The Border

Does the hon. Gentleman agree that apart from the simple question of money—the question that has been raised of giving with one hand and taking away with the other—a fundamental philosophical and structural issue is at stake about the difference between a complex and opaque benefits system on one hand, and the clear structural reform of taking people out of tax on the other? The latter system, which the Government propose, is simpler and more sustainable, and it is an important structural reform. It is not simply about how much money people get.

Photo of Brooks Newmark Brooks Newmark Conservative, Braintree

I agree with almost everything that my hon. Friend said, up to the point where he said that it is not about how much money people get. The Government have proposed to give people more money. The previous  Labour Government—and, I have to say, the Conservative Government before that—taxed people who were on very low incomes, and they operated a complicated benefits system where they took money with one hand and gave it back with the other. By raising the threshold, we are giving that money to people so that at least they are now above basic poverty level, which I believe is around £9,000 or £9,500. It seems counterintuitive to tax people who are below poverty level, and what we are doing now is to give them that cash and tell them that they have a choice over how to spend those limited resources—I admit that £10,000 or £11,000 is not much.

Photo of Rory Stewart Rory Stewart Conservative, Penrith and The Border

The key point, presumably, is that the Government are not giving that money to people; they are simply not taking it from people. That is an important Conservative philosophical difference.

Photo of Brooks Newmark Brooks Newmark Conservative, Braintree

That is why my hon. Friend is much cleverer than I am. He is absolutely right. It is the principle of not taking money, and of leaving people with as much money as we judge to be reasonable before we begin to tax them. We have now drawn that level at £10,000. I hope, looking beyond 2014 or 2015, that we will continue to raise it, after we win the next election in 2015, to more than the magic £10,000.

Photo of Fiona O'Donnell Fiona O'Donnell Labour, East Lothian

I hope that the hon. Gentleman will indulge me by taking a couple of steps back, because I am trying to get clarity on the intellectual flexibility that he has advocated. Is he saying to the family of a two-year-old, a three-year-old, a four-year-old and a five-year-old that they should try to find a lodger to move into their property? Does he really think that that is a realistic option, and that there are people who will want to live with a family of four children aged five and under?

Photo of Brooks Newmark Brooks Newmark Conservative, Braintree

As I tried explaining earlier, back in the mid-90s that was the situation I faced. I had five children in one bedroom and I could not afford to move. I did have somebody who stayed with us for a year, because we had a spare bedroom and so we had an extra person stay with us. However, I do not want to go into my past life. I just want to say that the principle of choices is that people have choices—[ Interruption. ] If the hon. Lady will listen—

Photo of Brooks Newmark Brooks Newmark Conservative, Braintree

People have a choice whether they have one, two, three, four or five children and they have to live with the consequences.

The final point that I want to make is on amendment 9, which I know was not selected. I am curious as to why, among all the amendments that the Opposition could have tabled—I appreciated that removal of the 10p tax rate caused a lot of angst at the last election for Labour supporters—they did not propose bringing the 10p tax rate back in any of their amendments.

Photo of Ian Mearns Ian Mearns Labour, Gateshead

As amendment 8 refers to the living standards of basic rate taxpayers, I crave your indulgence, Mr Crausby, because I think that living standards also include employment prospects and certainty of employment in the future.

Photo of David Crausby David Crausby Labour, Bolton North East

Yes, they do, Mr Mearns, but not as far as these clauses are concerned. I want to keep to these clauses and I am desperately clinging to the line in amendment 8 that says

“The Chancellor shall review the overall impact of the Government’s overall budgetary measures on the living standards of basic rate taxpayers”.

If you can relate your remarks to that amendment, fine.

Photo of Ian Mearns Ian Mearns Labour, Gateshead

I certainly hope to prove that I can. From my own constituency’s perspective, the vast majority of employed taxpayers are in the basic rate bracket. I want to demonstrate that this Budget has a different impact on different parts of the country.

Despite the claims of job creation and figures illustrating that employment has increased under the coalition Government, every local authority area in the north-east region now has a minimum of 10% more jobseekers than before. County Durham and Darlington both have increases of 30%, and Northumberland has been the worst affected with a rise of 37% in unemployment since June 2010. That obviously has an impact on the local jobs market and the living standards of ordinary people, because it has a depressing effect on local wage rates and the rates at which people actually pay their income tax.

Almost 50,000 public sector jobs have been lost so far, and the employment rate stands at a sickly 64%. On average, there are 7.5 jobseekers per vacancy in the north east, and four times as many jobseekers as vacancies in Cumbria, with as many as eight per job in north Tyneside and 11 per job in Hartlepool. Not only are more people out of work but youth unemployment and especially long-term unemployment are continuing to rise. These figures demonstrate the ongoing failure of the Government’s economic policy and the challenge for our region, and for all of us who want to see the north-east and Cumbria grow and prosper. There is much work to be done, and trade unions are working particularly hard to influence and play a role in securing new developments in the area. Trade unions have been very positive in helping to attract the Hitachi development in Newton Aycliffe, for instance.

As well as having a differential impact, the Budget has had, to say the least, a mixed response among business leaders in the north-east. It has very little to help small or medium-sized businesses in the north-east of England.

Photo of Andy McDonald Andy McDonald Labour, Middlesbrough

My hon. Friend has described how these policies impact on people’s living standards and have depressed labour markets. Today in Middlesbrough, 20 full-time jobs were posted on the Directgov jobs website—three are, in fact, part time, two are zero-hours contracts, one is commission-only and one lasts only four weeks. Of the remainder, two require a degree, one requires a masters and four pay £16,000 a year or less. Does my hon. Friend think that is a true reflection of how these policies affect the north-east of England?

Photo of Ian Mearns Ian Mearns Labour, Gateshead

My hon. Friend has demonstrated that the economic impact of the Government’s Budget is very different in different places. We have recently seen a rise in unemployment in the north-east of England of 12,000, while the national increase was 60,000. Only 5% of the population reside in the north-east, but it accounts for 17% of the national unemployment increase. In comparison, there was a fall in unemployment of 17,000 in London.

At the other end of the tax spectrum, in a Finance Bill debate last year the Exchequer Secretary kindly gave us figures showing where the top-rate taxpayers reside. There have been some minor variations to those figures. Last year, 167,000 top-rate taxpayers lived in the three south-east regions—London, the south-east and East Anglia. This year, 180,000 reside in those three regions out of a total of 300,000 for the whole country. Only 3,000 reside in the north-east. So the Government’s Budget measures have a differential impact on different parts of the country.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

My hon. Friend is making a very powerful case not just for the north-east but for many other regions of the country. Many people do not feel that the Government speak for them. He reminds me of the words of the Chancellor, who, in his autumn statement in October, declared:

“We need an effort from each and every one. One nation working hard together. We are still all in this together.”

Does my hon. Friend share my concern that the Chancellor is completely out of touch?

Photo of Ian Mearns Ian Mearns Labour, Gateshead

I echo my hon. Friend’s sentiments. It does not feel like we are all in this together. Some 60% of the people who benefit from the cut in the top rate of income tax reside in the three south-east regions, and only 1% reside in the north-east. That differentiation in spending power has a major impact on local economies. Conversely, we are sucking money out of local economies by reducing public sector services. When people become unemployed, that also sucks out spending power from local economies. When spending power is sucked out of local economies and demand is depressed, it is very difficult for those economies to grow.

The north-east of England is a very different place now from what it was like in the 1980s when we lost the major industries of coal mining, shipbuilding and heavy engineering. Its economy has diversified to a great extent. In fact, pro rata the north-east is one of the strongest regions for exports in the whole country. But the Chancellor’s rebalancing, and the public service cuts in places such as the north-east of England, have had a severely depressive effect on the regional economy. The sad thing about the Budget is that there is no recognition that it has a differential adverse impact on different parts of the country.

We have had a wide-ranging debate today that has included things such as the bedroom tax and rents in the private sector and the public sector. Government Members asked earlier whether we were in favour of depressing the housing market, and I can tell them that the housing market in large parts of the north-east of England is very depressed indeed. Many houses are on the market for substantially less than they would have been five or six years ago.

Photo of Paul Uppal Paul Uppal Conservative, Wolverhampton South West

The hon. Gentleman is painting an interesting picture of the economy in the north-east. I represent a midlands urban seat, and I would appreciate his comments on the fact that in north-east England employment has increased by 1.4% over the past year and unemployment has fallen by 1.5%? The north-east has two local LEPs and three enterprise zones. Is he prepared to talk about those figures?

Photo of Ian Mearns Ian Mearns Labour, Gateshead

Absolutely. I am particularly prepared to talk about the LEPs.

Photo of David Crausby David Crausby Labour, Bolton North East

But not within this clause, Mr Mearns.

Photo of Ian Mearns Ian Mearns Labour, Gateshead

I bow to your judgment, of course, Mr Crausby. I am sure we will return to that discussion in other parts of our consideration of the Bill.

Overall, it is important that we consider the cumulative impact assessment. We have asked for cumulative impact assessments of other areas of Government policy such as welfare reform, for instance—its effects on disabled people, their families and carers. A range of Government Departments have cut services for children, and the cumulative impact has been disastrous for children, particularly in areas such as the north-east of England where many more children and young people fall below the poverty line now than was the case three or four years ago.

We are asking for an impact assessment of the living standards of basic-rate taxpayers, but that cannot be divorced from the differential impact of the Budget proposals in different parts of the country. Certain parts of the economy are doing quite well; others, I am afraid to say, particularly in the north-east of England, are not.

Photo of Chris Evans Chris Evans Labour, Islwyn

It is a pleasure to serve under your chairmanship, Mr Crausby. We have already heard your wise words this afternoon.

I will try to keep my remarks as close as possible to the clause and the amendments; I will not deviate by following some of the tangents we have seen Government Members follow. It is important to remember when debating a Finance Bill that it is a moot point: the Bill will go through. The granny tax and the personal allowances will go through. There is nothing we can do about that, but what has been wrong in this debate is that the Government seem to think that the Opposition can offer alternatives—anyone with experience of Finance Bills knows that we cannot. It is not the Opposition’s place to do that on Finance Bills, but we can talk about a review.

I turn first to the age-related allowances. As my hon. Friend the Member for Leyton and Wanstead has said, the basic personal allowance for income tax for those aged under 65 will rise to £9,440 and is planned to reach £10,000 by next year’s Budget. The Chancellor, however, has stuck to his plan to freeze age-related tax allowances for people aged between 65 and 74 at £10,500. That is fine. We cannot argue with it—we cannot offer an alternative because of where we are at the moment—but we can ask for a review because pensioners, like children, have been hard hit by this Government. I will move on shortly to address how young people are affected.

I do not want to stand here and score political points, but—[Interruption.] I will try not to score political points, and I will try to stick to the facts of what has been happening. Under this Government, we have seen a cut to the winter fuel allowance of £100 for the over-80s and £50 for those under 80 at a time when fuel bills are rising. Every year, more than 25,000 people die of cold. If anyone wants to score political points on that, let them do so; let them try to show how cold the Government are.

Secondly, a change in the indexation of state and other pensions from the retail prices index to the usually lower consumer prices index will, over time, compound that loss. Thirdly, for the state pension, which for decades has been one of the least adequate in Europe and has resulted in one in four older people living below the official poverty line, that change will see millions more struggle on their income, and still the Government go ahead with their plan.

Photo of Stephen Williams Stephen Williams Liberal Democrat, Bristol West

I enjoy listening to the hon. Gentleman because he reminds me of where I grew up. However, I think he rewrote history considerably there. Will he at least acknowledge that this Government have restored the earnings link in the state pension? In fact, they have gone further than that and put in a triple lock, so that the pension will always rise by the highest of earnings, inflation or 2.5%. Does he remember that in 1999 the then Chancellor the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) increased the state pension by the lowest of those measures, which amounted to 75p?

Photo of Chris Evans Chris Evans Labour, Islwyn 4:00 pm, 23rd April 2013

I know the hon. Gentleman is from Abercynon. I come from the Rhondda, which is the better valley of the two. It is not as good on his side. I am into fighting talk now. I can see why he left the valleys because with his attitude he had no chance of getting elected anywhere. That is the attitude— he talks about the right hon. Member for Kirkcaldy and Cowdenbeath and 1999, 14 years ago when the Labour party was in power. We heard the rewriting of history.

Photo of Sheila Gilmore Sheila Gilmore Labour, Edinburgh East

Perhaps Government Members should remember that that incoming Labour Government decided, perhaps wrongly, to stick to the Tory spending plans. I am not sure I would have done that, but I was not part of the parliamentary party at the time. Criticising Labour for doing that seems slightly odd, at least coming from the Conservatives.

Photo of Chris Evans Chris Evans Labour, Islwyn

I thank my hon. Friend for her intervention. I was in full flow then and about to take off into a barnstorming speech, but it has all gone. Her intervention was timely and much needed.

This pension change will make 4.41 million pensioners worse off in real terms, with an average loss of £83 a year. People who turn 65 on or after 6 April will be worst hit, losing up to £322 this year, unless the Chancellor’s plan is changed. That is why we need the review.

There are two things about this place that have frustrated me since I was elected: the harping back all the time to what happened under the previous Labour Government,  and the harping back by us to what happened under the Tory Government. That means nothing to someone losing £83. The number 4.41 million is massive, but it means nothing to the individual affected. People look to us today and think about the changes they are going to go through, so we need to review the specific policy.

The hon. Member for Bristol West—I am not singling him out for special praise—spoke earlier about the Green Book and the Red Book and all sorts of reviews. However, we do not have reviews of specific policies. There are many people in constituencies such as mine—Welsh constituencies that he knows well—who are ageing and are more impoverished. They are the ones who will be most closely affected. They need to know if the policy is going to work.

Photo of Mike Thornton Mike Thornton Liberal Democrat, Eastleigh

The hon. Gentleman mentioned that we should not look at his party’s record. Does he want to disavow completely his party’s record in government?

Photo of Chris Evans Chris Evans Labour, Islwyn

No. The hon. Gentleman has missed the point. I know that he is very new to the House and I welcome him and thank him for that intervention. I spent a number of weeks in Eastleigh. It is a nice place, not so much for us, but it is a nice place.

My point was that we get nowhere by talking about previous records. We should only talk about what is happening here and now. A constituent might be an elderly person, one of those one in four in poverty, struggling to pay the food and heating bills, sitting in their coat too afraid to put an extra bar on the fire. Someone might sit in front of that person and say it was all the Labour party’s fault; that it was 13 years of Labour Government; or go even further and say that it was 18 years of Tory Government. That means absolutely nothing when the person is suffering at the moment.

They want to know whether the policies in place at the moment—today, 23 April—are having an adverse effect on their life. They need to know that the Government are not too arrogant to review that policy and say they may have got it wrong. That is the point I am making. It is not about rewriting history, or standing here and defending previous Governments. It is about trying to help those who are most in need at the moment.

In society, the oldest and youngest are most affected by poverty. When we talk about the clause and its impact on basic taxpayers, those taxpayers are probably on the poverty line. They are paying £1,500 for dual fuel bills from energy companies. They are being squeezed all the time, and their real wages are down by 2.4%. They may have a family with children struggling in poverty. We can quote statistics and explain how moving the tax band up will help to lift people out of poverty, but what does poverty mean? I am not denigrating any examples that we have heard today from people who have grown up in poverty. I enjoyed some of the back stories from Government Members, and I am not saying that we have a monopoly on being impoverished.

Poverty means that children are sent to school from cold homes. They are tired and not warm enough, and they do not have the intellectual or physical equipment to succeed in school. They are written off before they start, and that is a tragedy. That is why we need to know what impact the Government’s policies will have on  those who are most impoverished in society and I support that. It is all very well saying, “Well we have reviews, and more reviews.” We need to know what is happening on the ground.

It is not bad for the Government to look at policies and say that they might have got something wrong, or got something right, and to ask what is working and what is not working. There is nothing wrong with that, and I hope that when discussing the clause that is what we will talk about.

I will end with something that Dot Gibson, general secretary of the National Pensioners Convention, said:

“There’s nothing in these proposals for today’s pensioners—so we might get a single-tier state pension, but we’ll have a two-tier pension system. This will only add insult to injury to those 5m older women who currently get nowhere near £144 a week and will be left to struggle on with the complicated means tested Pension Credit

Those are the people we have been sent here to represent and they need our help. I am not going to denigrate the Government. They believe that what they are doing is right, and that is what they were elected for, but there should be some check on what they are doing and whether it is right. I urge Government and Opposition Members to call for a review.

Photo of Ben Gummer Ben Gummer Conservative, Ipswich

It is a great pleasure, Mr Crausby, to follow the hon. Member for Islwyn who spoke with his traditional passion, eloquence and intellectual coherence. It is a good way to start a debate on the clause and the two amendments before us. They had not been addressed as directly as he managed to do. I will make a short speech in support of the clause and against the two amendments.

The clause does something very simple. As my hon. Friend the Member for Wycombe said, there is no better way of taking low-paid people out of income tax than raising the personal allowance, and there is no better way of allowing people with low incomes to retain as much of the money that they have worked hard for than raising the personal allowance. It is a far more efficient way of ensuring that than recycling money through the Government machine in the form of tax credits.

Some Opposition Members including, I am sure, the shadow Minister, know the failings and complications that came about with initiation of tax credits: the massive waste, the extraordinary confusion and the fact that many of our constituents still have to grapple with the significant problems. If only the Opposition in their time had been as bold as the coalition Government and raised the personal allowance instead of introducing tax credits. It would not have been a complete supplement, but it might have done much that they had wanted to achieve. I admire what they wanted to achieve.

Photo of Steven Baker Steven Baker Conservative, Wycombe

If only they had only introduced universal credit, because the combination of that and the personal tax allowance going up is marvellous.

Photo of Ben Gummer Ben Gummer Conservative, Ipswich

My hon. Friend has accelerated me to my next point. The two work perfectly together. The boldness of the reforms being undertaken by my hon. Friend the Minister and his counterparts in the Department for Work and Pensions will create the greatest change to  incentives to work and support for those people who have not been helped into the job market since the second world war. This is an integral part of that reform. The Government should be lauded for it. I know there are Members on the Opposition Front Bench who admire what this is trying to achieve and would probably like to do it themselves. It is interesting to see the difference of opinion between the Front Bench, and what I imagine they may be thinking, and some of their Back Benchers, who intrinsically hate the idea of lifting people out of tax. They would prefer to tax people and return that money to them via their own control. We have old socialists here who believe that paying people via the state is better than allowing them to keep their own money.

Photo of Sheila Gilmore Sheila Gilmore Labour, Edinburgh East

I am disappointed that the hon. Member appears not to have taken note of the report that I referred to earlier from the Resolution Foundation which points out that if we want to help people on lower incomes, there may be more targeted and better ways of doing it. At least that is an option that should be considered and not ruled out as he is doing.

Photo of Ben Gummer Ben Gummer Conservative, Ipswich

The hon. Lady spoke at length about an indiscriminate way of taking low-paid workers out of tax. But she should know that the upper rate of tax is being adjusted to make sure that this does not benefit upper rate taxpayers. She talked at length also about how people on both middle and low incomes are suffering considerable pressure on their living standards. I completely agree, as does everyone on the Government Benches. But this is exactly why this measure is so important. It helps people on both low and middle incomes but does not give a free gift to those on high incomes. We satisfy precisely those complaints that she makes. Were she to take a greater interest in the detail of the clause itself rather than making spurious points about things that are not in the clause she might understand why this is a fundamentally good thing for low-paid people, something which I suspect her own Front Bench would support.

Just on the two amendments, I have had to stand in the kitchens and front rooms of many constituents who are profoundly concerned about the changes to the income tax relief for old age pensions. People are worried about this and it is having an impact on them. It means that I have to have a direct conversation with them about the fact that we are almost bankrupt. We are in this position now—I will not get into an argument of blame—where the Government need to make savings. The hon. Lady made a series of statements that were frankly contradictory. On the one hand she talked about a depression in living standards and the problems for those on low incomes. We understand that and agree with it. That is precisely the reason for the introduction of this measure. But on the other hand she talked about the deficit and the fact that we still have the highest deficit in the western world, something that was brought down by a quarter and nearly to a third by this coalition Government but still not reduced to zero.

At some time the Opposition have to have that honest discussion with the electorate in the same way that I have had and other Government Members have had with their constituents where we say, “I’m sorry. I would like to give you a tax break. That is why I am a Conservative. I want to see people not paying tax. That  is one of the core principles of my political being. But at the moment we cannot afford it.” That robust conversation has to be had. The Opposition may wonder why people are not voting any more. They may wonder why Tony Blair was returned in 2005 with fewer votes than John Major lost by in 1997. They might reflect on the fact that the reason people are not voting is because the Labour party has failed to have robust conversations with the electorate for 13 years. Now at last we are and now at last we are putting right some of the financial damage done by the last Government. That is why I support wholeheartedly the radical reform in clause 2 and reject the spurious amendments 7 and 8.

Photo of David Gauke David Gauke The Exchequer Secretary 4:15 pm, 23rd April 2013

It is a great pleasure to welcome you back to the Chair this afternoon, Mr Crausby. Some time ago, the hon. Member for East Lothian said that this was a Budget in which there was not much to discuss, but I congratulate the Committee on finding plenty to discuss on clause 2.

To be helpful to the Committee, the clause supports our aim to create a fairer tax system by rewarding the efforts of those who want to work hard and progress. We believe that raising the tax-free personal allowance is the most effective way to support those on low and middle incomes because it enables them to keep more of the money that they earn, a point made eloquently by a number of my hon. Friends.

The clause will increase the income tax personal allowance by £1,335, the largest ever cash increase, from £8,105 in 2012-13 to £9,440 in 2013-14. As my hon. Friend the Member for Braintree pointed out, that will lift an additional 1.1 million individuals out of income tax altogether and give 24 million taxpayers an average real-terms gain of more than £200 a year. For the typical basic rate taxpayer, that will mean an extra £267 of cash in their pocket in 2013-14, which is an extra £5 per week since the start of the new tax year.

The clause represents the next step towards meeting our long-term objective of increasing the personal allowance to £10,000. In the Budget, the Chancellor announced that that commitment will be met a year ahead of schedule: in 2014-15, the personal allowance will rise by a further £560 to reach the £10,000 target. Altogether, the increases introduced by the Government will take 2.7 million individuals out of income tax from April 2014, and benefit 20 million basic rate taxpayers by more than £500 a year in real terms; in cash terms, that is a gain of more than £700 since 2010. This is a policy that supports hard-working individuals on low incomes and has ensured that those on the national minimum wage have seen their income tax bills cut in half under this Government. Such individuals may now work more than 29 hours a week without paying income tax.

To turn to the two Opposition amendments, a number of my hon. Friends have commented that the Labour party seems to be relying somewhat heavily on amendments that call for reviews. I had a quick look at the amendment paper and the Opposition have tabled 10 amendments, every single one of them calling for a review, a report or an impact assessment. It is striking to hear a number of  speeches saying that the policies pursued by the Government are terrible, failing, catastrophic and so on, but that Labour’s answer is to boldly go forward with a review or a number of reviews. No doubt we can look forward to debating the prospect of further reviews over the course of the Finance Bill proceedings.

Amendment 8 calls for a report on the cost of living for basic rate taxpayers. The Government recognise that households face considerable pressures with the cost of living, which is why, within the constraints we have, we are taking measures to support households. Increasing the personal allowance is a key part of that, although I was struck by one of the criticisms made by the hon. Member for Newcastle upon Tyne North—that this is somehow going to help the wealthiest. Of course, in clause 3 we have taken steps that reduce the basic rate limit, ensuring that the benefits of the increase are shared fairly. Predominantly, the benefit will fall to those who are basic rate taxpayers.

As my hon. Friend the Member for Braintree pointed out, it is worth noting that in 2010 individuals could earn only £6,475 before they began to pay income tax. I would be interested to hear whether the Labour party has any sense of regret or embarrassment that the personal allowance was quite as low as it was when it left office after 13 years. I would certainly happily take an intervention on that. As I have outlined, we have taken steps to increase the personal allowance to £10,000 from next year, which is an increase of £3,525 and means that the personal allowance will have risen by more than 50% in just four years.

Photo of David Gauke David Gauke The Exchequer Secretary

I think the hon. Lady was fastest on the draw, so I will give way to her.

Photo of Sheila Gilmore Sheila Gilmore Labour, Edinburgh East

The problem is that despite all this policy that the Minister’s Government have been pursuing for three years in relation to the tax allowances—and all the other policies that we would like to see reviewed—people’s real wages are falling. Their living circumstances are worsening. Something is not working.

Photo of David Gauke David Gauke The Exchequer Secretary

An important point was put very well by my hon. Friend the Member for Ipswich a moment or so ago. As it happens, we are likely to see an increase in disposable income. According to the OBR, there was an increase in 2012 and we will see that accelerating as we go through this Parliament, but there are undoubtedly significant cost of living pressures, and we are trying to take steps to redress them. That is why there is a freeze in council tax, which the hon. Member for Edinburgh East does not support, but which we think does help a number of people. We are seeing a freeze in fuel duty, which means that it is 13p per litre lower than it would otherwise be.

I will not deny that we have had to take some difficult decisions when it comes to the public finances. We have put up VAT, and we have had to make some difficult decisions when it comes to public spending and benefits—[Interruption.] And tax credits. If we are serious about getting the deficit down as a responsible Government,  we have to make some of those decisions. We would not be being straight with the British people if we said, “Oh, no, we can do all of this. We can spend extra money here and cut this tax here and we don’t have to increase that tax there.” That seems to be the prospectus that we have heard from the Opposition. It is not being straight with the British people to complain about the deficit, but then oppose every single measure that we put forward in an attempt to deal with it.

Photo of Marcus Jones Marcus Jones Conservative, Nuneaton

Going back to the measly tax-free allowance that was in place when the Labour party was in Government, does my hon. Friend not agree that the previous Government put people in a perverse situation in which the tax-free allowance never, by any stretch of the imagination, kept pace with the increase in the minimum wage, which meant that year after year more and more people were trapped into income tax on very low incomes? The other perverse thing that happened was that those people who did not want to be trapped in income tax decided to work fewer hours and then claim tax credits, which put us in a situation in 2010 where the welfare bill was ballooning.

Photo of David Gauke David Gauke The Exchequer Secretary

Once again, my hon. Friend makes a valuable point. If one looks at our policy of increasing the personal allowance and then also looks at our welfare reforms, it is very clear that we are determined to do everything we can to make work pay, which was something that the previous Government simply failed to do. That is one of the negative legacies that we were left with, and it is right that we should try to address that. Yes, there are cost of living pressures, but can we honestly say as a Government that we can deal with all of those pressures simply by borrowing more money? No, we cannot, because the reality is that what will really damage living standards over a long period of time is economic instability and an unsustainable fiscal position. That is, I am afraid, what the Opposition are advocating. The sooner they depart from that approach, the better it will be for them.

Photo of Fiona O'Donnell Fiona O'Donnell Labour, East Lothian

Can the Minister tell us if, at the end of this Government, more children will be living in poverty in households paying the basic income tax rate? Either way, is that desirable or acceptable?

Photo of David Gauke David Gauke The Exchequer Secretary

The first point is that there are significant weaknesses in the measurement of child poverty. The measure is based on 60% of median income, which causes some curious effects. When the economy goes into recession, there is a reduction in child poverty, which is perverse. We are keen to ensure we make work pay. If we want to get to grips with child poverty in the long term, in a sustainable way that does not rely on large transfers of payments and an expensive tax credits system, we must ensure that we have a culture that encourages work, that we have fewer workless households and that households can take greater responsibility.

Photo of Brooks Newmark Brooks Newmark Conservative, Braintree

On that point, it is worth reflecting not just on the general definition of poverty, but on absolute poverty. Absolute poverty increased under the previous Government, with the result that 100,000 more children were living in poverty when Labour left Government compared with when they got in.

Photo of David Gauke David Gauke The Exchequer Secretary

I am grateful for my hon. Friend making that point. Having set out that we live in difficult times and are having to make difficult decisions, I wish to make a point about the distributional analysis that lies behind many of the points that have been raised by Opposition Members. As I have said on several occasions, the Government have taken unprecedented steps to publish distributional analyses alongside each Budget and autumn statement document. They show the impact of all the Government’s policies on household incomes and separate the impact of tax measures from the other policies.

It is important to consider all the Government’s policies, and not just the taxation measures. The distributional analysis published with the Budget shows that the top 20% of households continue to make the greatest contribution to reducing the deficit, both as a percentage of their income and in cash terms. Amendment 8 would have us produce a further supplementary report, which is unnecessary.

On the wider issue of the personal allowance, the hon. Member for Newcastle upon Tyne North was pressed a number of times in her thorough speech on whether she supported what we have done. I have discussed the dramatic change in the level of the personal allowance.

Photo of David Gauke David Gauke The Exchequer Secretary

From a sedentary position, she says she said yes, but I took a careful note of her answers. Her initial response was, “We don’t oppose it.” Then she said, “We are not against it.” Then she said, “We are not objecting.” Finally she said, “We support it.” That does not strike me as a ringing endorsement of the dramatic increase in the personal allowance, which has made a difference to millions of people.

Photo of James Duddridge James Duddridge Chair, Regulatory Reform Committee

I may be predicting where the Minister is going, but does he think the hon. Member for Newcastle upon Tyne North should review?

Photo of David Gauke David Gauke The Exchequer Secretary

I look forward to my hon. Friend tabling amendments to that effect. It would at least provide variation. I was struck by the equivocal response of the hon. Member for Newcastle upon Tyne North. She argued that increasing the personal allowance may benefit higher rate taxpayers, but then she complained that the adjustment in the basic rate limit means it particularly focuses on basic rate taxpayers.

Photo of Fiona O'Donnell Fiona O'Donnell Labour, East Lothian

The Minister is generous in giving way, but not so generous in answering the question put, so I will try again. Can he tell us whether there will be an increase or decrease in the living standards of basic rate taxpayers?

Photo of Fiona O'Donnell Fiona O'Donnell Labour, East Lothian

I am reading the amendment. The hon. Member for Braintree was wondering what I was reading from. Can the Minister tell us whether there will be an increase or decrease in the living standards of basic rate taxpayers when we look at the overall budgetary measures of the Government?

Photo of David Gauke David Gauke The Exchequer Secretary

I really do have to remind the hon. Lady that we inherited a deficit of £160 billion. She shakes her head as if that has absolutely nothing to do with the question, but the point is that we have to get the deficit down. We have to deal with a large structural deficit—[ Interruption. ]. Actually, the structural deficit is falling and we have reduced it by a third so far, at a time when Labour advocates increases in borrowing of an additional £200 billion, according to the Institute for Fiscal Studies.

We are taking the difficult decisions to get public spending on to a sustainable basis. If we do not address that, the prospects for living standards for the people of this country are very grim indeed. That is why we need to keep ourselves out of a sovereign debt crisis, which is why we need to have a sustainable path to get the public finances under control. The fact that Labour cannot even see that demonstrates that, when it comes to credibility, that lies exclusively with the parties on the Government side.

Photo of Stephen Doughty Stephen Doughty Labour, Cardiff South and Penarth 4:30 pm, 23rd April 2013

We have all seen the borrowing figures today, yet the Prime Minister said in 2010:

“In five years’ time, we will have balanced the books.”

What on earth did he mean? We are not balancing the books; at this rate it will be 402 years before we eliminate the deficit.

Photo of David Gauke David Gauke The Exchequer Secretary

I have to say that that is what the OBR predicts the fiscal position will be in five years’ time. The reality is that Labour advocates—we heard it in this debate today and in the Chamber last week—opposition to almost any measure to reduce the deficit and calls for a reduction in VAT. Labour Members may think that that is the way to get the deficit down and to correct the public finances, but I am afraid that that simply will not work. As always, they want to borrow their way out of every economic situation.

Photo of Kwasi Kwarteng Kwasi Kwarteng Conservative, Spelthorne

What does the Minister think about the Opposition’s argument that the best way to get out of a debt crisis is simply to borrow more money?

Photo of David Gauke David Gauke The Exchequer Secretary

My hon. Friend is exactly right; that is their approach. Again today we see their opposition to almost any attempt to control public spending or get taxes coming in.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

I have a genuine question. I ask the Minister to strip away the rhetoric and tell the Committee whether he believes that there is a connection between economic growth and the success of our economy, and the health of our public finances? Does he understand that the health of the economy is a driver for repairing our deficit, or does he not?

Photo of David Gauke David Gauke The Exchequer Secretary

Let me be perfectly clear: the reason why the public finances have not turned out as the Office for Budget Responsibility predicted in 2010 is because economic growth has not been what it predicted. However, if we accept the OBR’s numbers, we have to accept its analysis of why growth has not been what it predicted, which is because of the eurozone crisis, the effect of the financial  crash was much more severe than anticipated at the time and commodity prices. That is not my analysis, but that of the Office for Budget Responsibility. Does the Labour party seriously believe that, if we were borrowing an extra £30 billion, £40 billion or £50 billion a year, the eurozone crisis would not have happened—do they seriously believe that?

Photo of David Gauke David Gauke The Exchequer Secretary

As I have the opportunity, I will ask. Does the hon. Gentleman, who is about to intervene, seriously believe that, had we been borrowing £20 billion, £30 billion or £40 billion more a year, the eurozone crisis would not have happened?

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

If the Minister and the Chancellor of the Exchequer had been borrowing to grow the economy, the public might have given them the benefit of the doubt. My question to the Minister is simply this: does he understand that Government policy and his decisions might have an impact on economic growth? In other words, does he believe that he and the Treasury have an impact on the performance of the economy? Is the economy affected only by every other exogenous factor, or is it something that the Treasury can affect?

Photo of David Gauke David Gauke The Exchequer Secretary

Of course, there are steps that a Government can take to help economic growth. That is exactly why we have taken steps such as making the UK tax system much more competitive, which we will debate shortly. That is why we have taken steps to reduce the regulatory burden on businesses so that they can create wealth, and that is why we are spending more on infrastructure than the plans that we inherited. The reality, however, is that we have faced difficult economic conditions, and the only answer that we have heard from the Opposition is to spend and borrow more money.

Photo of Paul Uppal Paul Uppal Conservative, Wolverhampton South West

Several interventions have gone back and forth, starting with the point made by the hon. Member for Edinburgh East about the standard of living. Did that not miss the basic point that the whole economic argument that we are having is actually about responsibility—the responsibility that we bequeath to future taxpayers who are young or not yet born? The simple, easy thing to do is to kick the can down the road, and that is what landed us in this mess in the first place.

Photo of David Gauke David Gauke The Exchequer Secretary

My hon. Friend is absolutely right. He makes a very good point, and it would not be responsible for us to try to pretend that there was not a big deficit that we needed to address.

Amendment 7 asks the Government to review the impact of the change to age-related allowances on anyone who reached the age of 65 on or after April 2013. We do not need to undertake a review to do that; I can set out now the impact of the tax changes on someone who reaches the age of 65 on or after April 2013. Basic rate taxpayers who turn 65 in this tax year will be among those who benefit from the largest ever cash increase in the personal allowance of £1,335. They will, therefore, receive the cash gain of £267 that I have already outlined. As a result of the increase in the  personal allowance under this Government, they will be nearly £600 better off in cash terms than they were in 2010.

I am sure the Opposition’s intention in tabling the amendment was to highlight our decision to withdraw age-related allowances for new recipients. Those who turn 65 this year would previously have qualified to receive an age-related allowance, but given our commitment to increasing the personal allowance to £10,000, there is no need to have a separate allowance for older people. The reforms will simplify the system and bring thousands of people out of self-assessment when all the allowances are aligned. More than 5 million of the poorest pensioners will not be affected at all by the changes, because half of those over the age of 65 pay no income tax. Nobody will pay more tax in 2013-14 than in 2012-13 due to the withdrawal of age-related allowances alone. There are no cash losers.

The Government remain committed to supporting pensioners in other ways. Our triple lock means that the state pension will be uprated each year by whichever is highest: earnings, CPI inflation or 2.5%.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

The Minister seems to have quoted selectively from the Government’s impact assessment on the change to the annual allowance for pensioners, which states that 4.41 million pensioners will lose out to the tune of £86. Will the Minister clarify what consideration has been given to that, and to the fact that many pensioners have suffered this change at short notice, with very little opportunity to put measures in place to mitigate the impact? Four months earlier, the Chancellor was declaring that there was no way that he would penalise pensioners in this way. Four months later he was implementing a change that would very much impact on pensioners up and down the country.

Photo of David Gauke David Gauke The Exchequer Secretary

The hon. Lady has the tax impact and information notes and she quotes from them, but that has to be put into context. One has to look at all the policies in the round, and, in particular, at the largest ever cash increase to the basic rate pension of 5.2%, which we saw in 2012. That increased by around £120 a year more than under previous Governments. The previous Government’s policy was to uprate by earnings. That is the effect of the triple lock guarantee: £120 a year more for pensions than would have been delivered had we stuck with the policy that we inherited. From April 2013 the basic rate state pension will be raised again by 2.5% to £110.15 per week, thanks to the triple lock.

Photo of Sheila Gilmore Sheila Gilmore Labour, Edinburgh East

Does the Minister accept that the increase would not have been anything like that had it not been for the big spike in inflation which followed the Chancellor’s initial Budgets?

Photo of David Gauke David Gauke The Exchequer Secretary

The reality is that, had we stuck with the policies that we inherited, we would not have been increasing pensions by the same amount. We have protected pensioners as much as possible.

Photo of Ian Mearns Ian Mearns Labour, Gateshead

I cannot help but remember something. Was there not some controversy within the Treasury team at the time of the discussions about the granny  tax? I seem to remember that the hon. Member for Bromsgrove opposed it at the time. Is that not the case?

Photo of David Gauke David Gauke The Exchequer Secretary

It comes as news to me. The provision went through the House of Commons, so the hon. Gentleman might want to look at the votes.

Photo of Jon Ashworth Jon Ashworth Opposition Whip (Commons)

I want to be entirely helpful to the Minister. I recollect that the Mail on Sunday reported that the hon. Member for Bromsgrove apparently told the Chancellor, with respect to the granny tax:

“You may have done the numbers, and it may look neat and tidy to the number-crunchers in the Treasury, but you haven’t done the politics. This just won’t work, you must drop it.”

Is that the view of the hon. Member for Bromsgrove?

Photo of David Gauke David Gauke The Exchequer Secretary

If the hon. Gentleman believes everything that he reads, there are a few things that I might throw back at him—for example, The Independent’s claim that the Labour party is going to spend more than this Government. There was something in the Daily Mail today about the Labour party getting a fight from the furthest left-wing perspective since Neil Kinnock. There are all sorts of things that one reads in the newspaper; some I am inclined to believe and some I am not.

I have to say that I am not entirely clear, given that the Labour party has asked for a review of age-related allowances, quite what its position is. I asked a number of times whether, as a matter of principle, the Labour party thinks that the personal allowance should be lower for people under the age of 65. The hon. Member for Newcastle upon Tyne North (Catherine McKinnell), it would be fair to say, did not entirely answer that question.

I had assumed the hon. Lady would take the position that the abolition of age-related allowances was terrible and that she would reverse it. I am indebted, however, to my hon. Friend the Member for Amber Valley for highlighting the Fabian Society report that is directly relevant to the review requested in amendment 7. He intervened to ask her whether she was sympathetic to that report, and she replied—I do not have her verbatim answer—that it could be looked at as part of the review process.

It is worth quoting what Andrew Harrop of the Fabian Society said in The Times today:

“The older generation has been protected from the worst of the austerity measures. That special treatment must end—instead there should be a presumption of parity between age groups, and that must mean sharing out the pain of tax rises or spending cuts… So the tax system could be redesigned to treat earnings and pensionable income the same by merging national insurance and income tax. The prize is big—closing the ‘tax gap’ between young and old with the same incomes would raise about £7 billion for the Treasury.”

I was therefore interested to learn this morning that that will be part of the review, and the Opposition want one so that the Fabian Society proposal will be considered. I must say that that does not persuade me to accept amendment 7. We do not intend to pursue such proposals, but I was interested to hear that they are considering going down that route.

We have had a lengthy and thorough debate, but it is worth pointing out that clause 2 represents a significant step in our assured progress towards making the first £10,000 of income free of tax. It will ensure that both fairness and reward for aspiration remain at the heart of this Government’s approach to taxation. It will put more money in the pockets of hard-working people and help them to live in these difficult times. Amendments 7 and 8 are unnecessary and should not be pressed.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury) 4:45 pm, 23rd April 2013

I thank the Minister for his thorough response to a very thorough debate. As we contemplated today’s disappointing borrowing figures, it struck me that, by our calculations, it will take the Government 400-odd years to reduce the deficit at the rate they are going. I am sure you share our concern, Mr Crausby, that it will take us as long to get through the Bill at our current rate.

I applaud the thoroughness of today’s consideration of an important measure. It is one of the few positive measures in this Government’s Finance Bill—a small bit of help for low and middle income earners—but it does not change the reality that was set out in many passionate speeches. My hon. Friends the Members for Edinburgh East, for Gateshead and for East Lothian put forceful arguments for our amendments seeking a thorough review of the overall impact of the tax and spending changes. We also heard spontaneous contributions from Government Members who felt compelled to stand up and defend their Government’s one positive policy.

We have had a wide-ranging debate on the housing tax, unemployment, regional economics and investment in jobs and growth; I appreciate that there has been some concern about the breadth of the debate. It highlighted that the Government are standing by the policy as a blueprint for bringing back jobs, growth and economic benefits to the whole country. However, I and many others worry that the Government cannot see that their plan is simply not working. To take hon. Members back a couple of years, I will quote the Chancellor:

“Today, for the first time in our history, Britain’s credit rating is under threat. Indeed, some commentators think a downgrade is inevitable. That would mean higher interest rates on our national debt and throughout our economy and could tip us back into recession, with more jobs lost and more businesses going under. That’s why our first benchmark”—

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

I will just finish quoting what the Chancellor said in 2010. He said:

“That’s why our first benchmark is to cut the deficit more quickly to safeguard Britain's credit rating. I know that we are taking a political gamble to set this up as a measure of success. Protecting the credit rating will not be easy.”

I will say that it “will not be easy.” He continued:

“The largest bond investor in the world thinks there is an 80 per cent chance of a downgrade. But the economic risk of not setting ourselves this benchmark is not one that I am willing to take.”

And he was backed up by the Prime Minister, who said:

“It’s more about recognising that the first priority of any government has got to be keeping UK PLC’s credit rating. That’s got to come first. It’s the only responsible thing to do.”

We all know how that story ends.

Photo of Stephen Williams Stephen Williams Liberal Democrat, Bristol West

Of course the credit ratings are important—no one would deny that—and they benchmark our country against other countries, which have also seen a fall in their ratings. However, surely the most important measure is the rate at which the country can borrow in the international markets. Would the hon. Lady like to tell us at what rate the UK Government currently sell their debt compared with a month ago? I think she will find that it has fallen.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

That is not a helpful intervention because it fails to recognise the basic premise of what I am saying, which is that the Chancellor set out his economic plan for this country and set out his own benchmark. I am not talking about the hon. Gentleman’s benchmark, or my benchmark, or the people of Britain’s benchmark. The Chancellor set out his benchmark for his own economic plan and Government Members, including Ministers, are here today justifying the execution of that plan, which by all measurements is clearly failing.

That is why we have tabled amendments to ask for a review, for a consideration, for a rethink, of the impact that these measures are actually having on real people in the country. It is not enough for Government Ministers to hide behind the deficit reduction strategy, or the supposed deficit reduction strategy, which is desperately off course and which it is calculated will take 400 years to clear the deficit at the rate that the Government are achieving it. It is not enough to hide behind the mantra of a deficit reduction strategy, to make a tax grab on low and middle-income earners and to hand out tax cuts to the very richest.

Photo of Kwasi Kwarteng Kwasi Kwarteng Conservative, Spelthorne

The hon. Lady will appreciate that the 10-year gilt—the interest rate—has actually fallen in the past few months. That means that investors—people—have more confidence in the current Government and it is very likely that if, God forbid, Labour should ever form a Government, that 10-year rate will go up. What does she think about that?

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

I appreciate what the hon. Gentleman is saying but once again it completely fails to recognise that, by all economic measurements and by the IMF’s own message to the Chancellor, this austerity plan is failing. That is borne out by the reality that people are facing up and down the country.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

I will take one more intervention and then I suspect that we ought to push the amendment to a vote, because we want Government Members to support our amendment.

Photo of Brooks Newmark Brooks Newmark Conservative, Braintree

Once again, I thank the hon. Lady for her generosity in giving way. Putting the politics aside, I am sure that the shadow Minister, the hon. Member for Kilmarnock and Loudoun, who is sitting next to the hon. Lady, knows the reality, namely that when these predictions and projections were made the economic  landscape was slightly different from today. Things are a lot worse, and anybody who does basic economic modelling knows that circumstances have changed and things are tighter. However, I remind her that Christine Lagarde, the head of the IMF, said that she shivered to think what would have happened if the UK had not pursued a fiscal consolidation plan.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

I was going to suggest that the hon. Gentleman did not get the memo, but judging by the pleasure of Government Members at his intervention, perhaps the memo was changed. The Minister says that was then and this is now, but he quotes now and says that was then. He needs to get with the programme and get back in touch with ordinary people, who are paying the price.

Photo of Stephen Doughty Stephen Doughty Labour, Cardiff South and Penarth

I wonder whether my hon. Friend, like me, wants to get back to the nub of the issue. Essentially, we have a Government who have four completely different policies. We are talking about quotes and things that different people have said, but perhaps we should be listening more to what the Business Secretary said back in March:

“The basic point is that we are in a very difficult position, we are facing an economy that is not growing, or only a bit. We have got to try things. We don't want to be Japan with a decade of no growth.”

We are hearing the Chancellor, the Prime Minister, and others saying completely different things all over the place. Should we not be listening to the Business Secretary?

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

The other point that the hon. Member for Braintree made was that we were in a very different economic climate in 2010. I would agree with him, because the economy was growing. The economy has stagnated since, under this Government’s policies and on this Government’s watch. We have had a double-dip recession and a double downgrade from the credit ratings agency.

I remind Committee members that the Government have set great store from day one on transparency and on making information readily available to the public. Government Members should have no qualms about supporting our amendments that call, very reasonably, for an impact assessment of the changes in tax and benefits, and overall, of the impact of the Government’s Budget measures on ordinary people up and down the country. Our proposals would facilitate the proper scrutiny of the Government’s policies and enable everybody to make a proper judgment of their impact, so that rather than us arguing about them in Committee, ordinary members of the public could see the true measures that the Government are subjecting the country to.

As I certainly get the indication from Government Front-Bench Members that they are not willing to support our amendment, we will press both amendments to a vote.

Question put, That the amendment be made.

The Committee divided: Ayes 12, Noes 17.

Division number 1 Decision Time — Clause 2 - Personal allowance for 2013-14 for those born after 5 April 1948

Aye: 12 MPs

No: 17 MPs

Ayes: A-Z by last name

Nos: A-Z by last name

Question accordingly negatived.

Amendment proposed: 8, in clause 2, page 2, line 6, at end add—

‘(3) The Chancellor shall review the overall impact of the Government’s overall budgetary measures on the living standards of basic rate taxpayers and place a copy of this review in the Library of the House of Commons within six months of Royal Assent.’.—(Catherine McKinnell.)

Question put, That the amendment be made.

The Committee divided: Ayes 12, Noes 17.

Division number 2 Decision Time — Clause 2 - Personal allowance for 2013-14 for those born after 5 April 1948

Aye: 12 MPs

No: 17 MPs

Ayes: A-Z by last name

Nos: A-Z by last name

Question accordingly negatived.

Clause 2 ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned.— (Greg Hands.)

Adjourned till Thursday 25 April at half-past Eleven o’clock.